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Business Groups and Trade in East Asia: Part 2, Product Variety

Author

Listed:
  • Robert Feenstra
  • Tzu-Han Yang
  • Gary G. Hamilton
  • Pierpaolo Battigalli

    (Department of Economics, University of California Davis)

Abstract

We analyze the impact of market structure on the trade performance of South Korea, Taiwan and Japan. Korea has many large, vertically-integrated business groups known as chaebol, whereas business groups in Taiwan are smaller and more specialized in the production of intermediate inputs. We test the hypothesis that the greater vertical integration in Korea results in less product variety than for Taiwan, by constructing indexes product variety and ""product mix"" in their exports to the United States. It is found that Taiwan tends to export a greater variety of products to the U.S. than Korea, and this holds across all industries. In addition, Taiwan exports relatively more high-priced intermediate inputs, whereas Korea exports relatively more high-priced final goods. A comparison with Japan is also presented, and we find that that Japan has greater product variety in its sales to the U.S. than either Taiwan or Korea

Suggested Citation

  • Robert Feenstra & Tzu-Han Yang & Gary G. Hamilton & Pierpaolo Battigalli, 2003. "Business Groups and Trade in East Asia: Part 2, Product Variety," Working Papers 9614, University of California, Davis, Department of Economics.
  • Handle: RePEc:cda:wpaper:96-14
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    References listed on IDEAS

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    1. repec:fth:michin:337 is not listed on IDEAS
    2. Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
    3. Gary R. Saxonhouse, 1993. "What Does Japanese Trade Structure Tell Us about Japanese Trade Policy?," Journal of Economic Perspectives, American Economic Association, vol. 7(3), pages 21-43, Summer.
    4. Dani Rodrik, 1994. "Industrial Organization and Product Quality: Evidence from South Korean and Taiwanese Exports," NBER Chapters,in: Empirical Studies of Strategic Trade Policy, pages 195-210 National Bureau of Economic Research, Inc.
    5. Feenstra, Robert C, 1994. "New Product Varieties and the Measurement of International Prices," American Economic Review, American Economic Association, vol. 84(1), pages 157-177, March.
    6. Granovetter, Mark, 1995. "Coase Revisited: Business Groups in the Modern Economy," Industrial and Corporate Change, Oxford University Press, vol. 4(1), pages 93-130.
    7. Hamilton, Gary G & Feenstra, Robert C, 1995. "Varieties of Hierarchies and Markets: An Introduction," Industrial and Corporate Change, Oxford University Press, vol. 4(1), pages 51-91.
    8. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    9. Robert Z. Lawrence, 1991. "Efficient or Exclusionist: The Import Behavior of Japanese Corporate Groups," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 311-341.
    10. Sato, Kazuo, 1976. "The Ideal Log-Change Index Number," The Review of Economics and Statistics, MIT Press, vol. 58(2), pages 223-228, May.
    11. K.C. Fung, 1991. "Characteristics of Japanese Industrial Groups and Their Potential Impact on U. S . - Japanese Trade," NBER Chapters,in: Empirical Studies of Commercial Policy, pages 137-168 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Tito Boeri & Joaquim Oliveira Martins, 2002. "Transition, variété des produits et intégration économique," Economie & Prévision, La Documentation Française, vol. 0(1), pages 55-69.
    2. Feenstra, Robert C. & Madani, Dorsati & Yang, Tzu-Han & Liang, Chi-Yuan, 1999. "Testing endogenous growth in South Korea and Taiwan," Journal of Development Economics, Elsevier, vol. 60(2), pages 317-341, December.
    3. Tito Boeri & Joaquim Oliveira Martins, 2002. "Varieties, Jobs and EU Enlargement," Rivista di Politica Economica, SIPI Spa, vol. 92(1), pages 139-178, January-F.

    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights

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