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Korea's Horizontal and Vertical Intra-Industry Trade and FDI in Trade with East Asian Countries

Author

Listed:
  • Kim, Taegi

    (Chonnam National University)

  • Ju, Kyungwon

    (Chonnam National University)

Abstract

This paper examines Korea's intra-industry trade (IIT) by disentangling vertical from horizontal IIT, and analyzes the determinants of both IIT types in trade with East Asian countries during the period of 1991-2005. Korea's IIT with East Asian countries has increased rapidly, especially its high quality IIT, which has increased faster than horizontal IIT and low quality IIT, implying that Korea's product quality has improved over time. Korea's high quality IIT is larger in trade with developing countries, but its low quality IIT is larger in trade with Japan. The regression results show that the income differences between countries have a negative effect on horizontal IIT, and that Korea's high quality IIT becomes larger when Korea's income is higher than the income of partner countries. This supports the theory of IIT. Foreign direct investment (FDI) inflow has had a positive effect on increases in IIT, but the effects of FDI outflow are not certain. This suggests a policy implication that FDI inflow has a more positive effect on IIT than FDI outflow.

Suggested Citation

  • Kim, Taegi & Ju, Kyungwon, 2007. "Korea's Horizontal and Vertical Intra-Industry Trade and FDI in Trade with East Asian Countries," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 11(1), pages 27-56, June.
    • Handle: RePEc:ris:eaerev:0153
    DOI: 10.11644/KIEP.JEAI.2007.11.1.163
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    Cited by:

    1. Jeongmin Lee & Jinwoo Lee & Changhee Lee & Yulseong Kim, 2023. "Identifying ESG Trends of International Container Shipping Companies Using Semantic Network Analysis and Multiple Case Theory," Sustainability, MDPI, vol. 15(12), pages 1-20, June.

    More about this item

    Keywords

    East Asian Trade; Horizontal And Vertical Intra-Industry Trade; Quality; FDI;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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