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Vertical Intra-industry Trade between EU and Accession Countries

  • Hubert Gabrisch

The paper analyses vertical intra-industry trade between EU and Accession countries, and concentrates on two country-specific determinants: Differences in personal income distribution and in technology. Both determinants have a strong link to national policies and to cross-border investment flows. In contrast to most other studies, income distribution is not seen as time-invariant variable, but as changing over time. What is new is also that differences in technology are tested in comparison with cost advantages from capital/labour ratios. The study applies panel estimation techniques with GLS. Results show country-pair fixed effects to be of high relevance for explaining vertical intraindustry trade. In addition, bilateral differences in personal income distribution and their changes are positive related to vertical intra-industry trade in this special regional integration framework; hence, distributional effects of policies matter. Also, technology differences turn out to be positively correlated with vertical intra-industry trade. However, the cost variable (here: relative GDP per capita) shows no clear picture, particularly not in combination with the technology variable.

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Paper provided by Halle Institute for Economic Research in its series IWH Discussion Papers with number 12.

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Date of creation: Jul 2006
Date of revision:
Handle: RePEc:iwh:dispap:12-06
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  1. Shaked, Avner & Sutton, John, 1987. "Product Differentiation and Industrial Structure," Journal of Industrial Economics, Wiley Blackwell, vol. 36(2), pages 131-46, December.
  2. Hummels, D. & Levinsohn, J., 1993. "Monopolistic Competition and International Trade: Reconsidering the Evidence," Working Papers 339, Research Seminar in International Economics, University of Michigan.
  3. Rudolf Loertscher & Frank Wolter, 1980. "Determinants of intra-industry trade: Among countries and across industries," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 116(2), pages 280-293, June.
  4. Philippe Aghion & Simon Commander, 1999. "On the dynamics of inequality in the transition," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 7(2), pages 275-298, July.
  5. Djankov, Simeon & Hoekman, Bernard, 1996. "Intra-Industry Trade, Foreign Direct Investment and the Reorientation of East European Exports," CEPR Discussion Papers 1377, C.E.P.R. Discussion Papers.
  6. Flam, Harry & Helpman, Elhanan, 1987. "Vertical Product Differentiation and North-South Trade," American Economic Review, American Economic Association, vol. 77(5), pages 810-22, December.
  7. Carmen Mora, 2002. "The role of comparative advantage in trade within industries: A panel data approach for the European Union," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 291-316, June.
  8. Chonira Aturupane & Simeon Djankov & Bernard Hoekman, 1999. "Horizontal and vertical intra-industry trade between Eastern Europe and the European union," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 62-81, March.
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