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A Systematic Decomposition of World Trade into Horizontal and Vertical IIT

Listed author(s):
  • Lionel Fontagné

    ()

    (CES - Centre d'économie de la Sorbonne - CNRS - Centre National de la Recherche Scientifique - UP1 - Université Panthéon-Sorbonne, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

  • Michael Freudenberg

    (ITC (UNCTAD-WTO) - International Trade Center - WTO - UNCTAD)

  • Guillaume Gaulier

    (CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

We provide a systematic decomposition of world trade using harmonized bilateral flows at the most available detail (some 5,000 product categories), into three trade types: inter-industry, intra-industry in horizontally and in vertically differentiated products. The analysis is diachronic and considers country pairs such as France-Germany, United States-China, Malaysia-Singapore, or India-Nigeria. We show that the increase in IIT at the world level is due to two-way trade of vertically differentiated products. We find France and Germany having the highest share of IIT in their bilateral trade among all country pairs in the world. In value terms, the most important bilateral IIT is between the United States and Canada. Recently, specialization according to the classical theories of international trade (inter-industry trade), has recovered, due to the increasing participation of emerging economies in world trade.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00270504.

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Length:
Date of creation: 2006
Publication status: Published in Review of World Economics, Springer Verlag, 2006, 142 (3), pp.459-475. <10.1007/s10290-006-0076-6>
Handle: RePEc:hal:cesptp:hal-00270504
DOI: 10.1007/s10290-006-0076-6
Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-00270504
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. Gabszewicz, J. & Turrini, A., 2000. "Workers' skills, product quality and industry equilibrium," International Journal of Industrial Organization, Elsevier, vol. 18(4), pages 575-593, May.
  2. Gabszewicz, Jean Jaskold, et al, 1981. "International Trade in Differentiated Products," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 22(3), pages 527-534, October.
  3. Lionel Fontagné & Michaël Freudenberg, 1997. "Intra-Industry Trade: Methodological Issues Reconsidered," Working Papers 1997-01, CEPII research center.
  4. Gaulier, Guillaume & Zignago, Soledad, 2004. "Notes on BACI (analytical database of international trade). 1989-2002 version," MPRA Paper 32401, University Library of Munich, Germany.
  5. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  6. Lionel Fontagné & Michael Freudenberg, 1999. "Endogenous Symmetry of Shocks in a Monetary Union," Open Economies Review, Springer, vol. 10(3), pages 263-287, July.
  7. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
  8. Ecochard, Pierre & Fontagné, Lionel & Gaulier, Guillaume & Zignago, Soledad, 2005. "Intra-industry trade and regional integration," MPRA Paper 44182, University Library of Munich, Germany.
  9. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
  10. Finger, J M, 1975. "Trade Overlap and Intra-Industry Trade," Economic Inquiry, Western Economic Association International, vol. 13(4), pages 581-589, December.
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