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How Intra-Industry Trade Is Related to Income Difference and Foreign Direct Investment in East Asia

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  • Chan-Hyun Sohn

    (Faculty of Economics, Yokohama National University and KIEP, 79-3 Tokiwadai, Hodogaya-ku, Yokohama 240-8501, Japan)

  • Zhaoyong Zhang

    (NUCB and School of Accounting, Finance and Economics, Edith Cowan University, 100 Joondalup Drive, Joondalup, WA 6027, Australia)

Abstract

This paper investigates how intra-industry trade (IIT) is linked to cross-country income difference and foreign direct investment (FDI). We distinguish IIT as either horizontally or vertically differentiated, using bilateral exports and imports data for Japan and the remaining East Asian countries at the SITC five-digit level over 1990-2000. Our results show that the income difference has a negative relationship with the share of horizontal IIT, but a positive relationship with vertical IIT, and that cross-country FDI has a positive relationship with share of horizontal IIT and a negative relationship with share of vertical IIT. Copyright (c) 2006 The Earth Institute at Columbia University and the Massachusetts Institute of Technology.

Suggested Citation

  • Chan-Hyun Sohn & Zhaoyong Zhang, 2005. "How Intra-Industry Trade Is Related to Income Difference and Foreign Direct Investment in East Asia," Asian Economic Papers, MIT Press, vol. 4(3), pages 143-156, Fall.
  • Handle: RePEc:tpr:asiaec:v:4:y:2005:i:3:p:143-156
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    Cited by:

    1. Kimura, Fukunari & Obashi, Ayako, 2011. "Production Networks in East Asia: What We Know So Far," ADBI Working Papers 320, Asian Development Bank Institute.
    2. Sawyer, William C. & Sprinkle, Richard L. & Tochkov, Kiril, 2010. "Patterns and determinants of intra-industry trade in Asia," Journal of Asian Economics, Elsevier, vol. 21(5), pages 485-493, October.
    3. Imre Ferto & Károly Attila Soós, 2012. "Controversial issues in factors determining intra-industry trade," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(1/2), pages 132-148.

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