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Country-Specific Determinants of Intra-Industry Trade in Portugal

Author

Listed:
  • Horácio Faustino
  • Nuno Carlos Leitão

Abstract

Based on the theoretical models of Helpman and Krugman (1985), Falvey and Kierzkowski (1987) and Flam and Helpman (1987) and on the empirical studies of Greenaway, Hine and Milner (1994) and Hummels and Levinsohn (1995), we use a static and dynamic panel data approach to test the country-specific determinants of Portuguese intra-industry trade (IIT). We include income variables together with supply-side variables in order to test the demand similarity and factor endowments difference hypotheses. The results suggest that the Linder hypothesis is confirmed and that differences in income levels have a positive (negative) effect on vertical IIT (horizontal IIT and IIT). However, our findings only partially confirm Helpman and Krugman’s theoretical predictions.

Suggested Citation

  • Horácio Faustino & Nuno Carlos Leitão, 2007. "Country-Specific Determinants of Intra-Industry Trade in Portugal," Working Papers Department of Economics 2007/27, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
  • Handle: RePEc:ise:isegwp:wp272007
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    File URL: http://pascal.iseg.utl.pt/~depeco/wp/wp272007.pdf
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    References listed on IDEAS

    as
    1. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
    2. Stern, Robert M. & Maskus, Keith E., 1981. "Determinants of the structure of U.S. foreign trade, 1958-1976," Journal of International Economics, Elsevier, vol. 11(2), pages 207-224, May.
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    Cited by:

    1. Rosanna Pittiglio & Filippo Reganati, 2012. "Vertical intra-industry trade in higher and lower quality: a new approach of measuring country-specific determinants," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(1/2), pages 44-62.

    More about this item

    Keywords

    intra-industry trade; horizontal intra-industry trade; vertical intra-industry trade; Linder hypothesis; dynamic panel data.;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • C2 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables
    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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