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The Determinants of China-Japan-Koreas Vertical Intra Industry Trade to ASEAN4 countries


  • Fithra Faisal Hastiadi

    () (Department of Economics, Faculty of Economics, Universitas Indonesia)


East Asia has been witnessing an increased trade in parts and components over the last decade. This fact has increased the importance of Intra Industry Trade (IIT) within the region. To differentiate the types of IIT, this paper employs two types of threshold. The first one follows the work of Abd-el-Rahman (1991), Greenaway, Hine, and Milner (1994), and Fontagné, Freudenberg, and Péridy (1997), which mainly use a 15% threshold, the second one is based from the work of Fukao (2003) that employs 25% threshold. Should we know to which degree ASEAN-4’s exports are dispersed, we could easily extract the proper policy to cope with any economic shocks. Thus said, since China-Japan-Korea (CJK)’s Vertical IIT to ASEAN4 is a very important variable to provide cushions of any possible shocks therefore, it is very crucial to figure out the factors that determine the CJK’s Vertical IIT in South East Asia. Employing static panel data models, this paper concludes that logistic performance and the difference in wage or income are major determinants for the CJK’s Vertical IIT trend in ASEAN4 countries.

Suggested Citation

  • Fithra Faisal Hastiadi, 2012. "The Determinants of China-Japan-Koreas Vertical Intra Industry Trade to ASEAN4 countries," Working Papers in Economics and Business 201205, Faculty of Economics and Business, University of Indonesia, revised May 2012.
  • Handle: RePEc:lpe:wpecbs:201205

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    References listed on IDEAS

    1. Fukao, Kyoji & Ishido, Hikari & Ito, Keiko, 2003. "Vertical intra-industry trade and foreign direct investment in East Asia," Journal of the Japanese and International Economies, Elsevier, vol. 17(4), pages 468-506, December.
    2. Toshihiro Okubo, 2004. "Intra-industry Trade and Production Networks," IHEID Working Papers 13-2004, Economics Section, The Graduate Institute of International Studies.
    3. Tamura, Robert, 1996. "Regional economies and market integration," Journal of Economic Dynamics and Control, Elsevier, vol. 20(5), pages 825-845, May.
    4. Prema-chandra Athukorala, 2005. "Product Fragmentation and Trade Patterns in East Asia," Asian Economic Papers, MIT Press, vol. 4(3), pages 1-27, Fall.
    5. Kawai, Masahiro, 2005. "East Asian economic regionalism: progress and challenges," Journal of Asian Economics, Elsevier, vol. 16(1), pages 29-55, February.
    6. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
    7. Lionel Fontagné & Michaël Freudenberg & Nicolas Peridy, 1997. "Trade Patterns Inside the Single Market," Working Papers 1997-07, CEPII research center.
    8. Kawai, Masahiro & Wignaraja, Ganeshan, 2008. "Regionalism as an Engine of Multilateralism: A Case for a Single East Asian FTA," Working Papers on Regional Economic Integration 14, Asian Development Bank.
    9. Harvie, Charles & Lee, Hyun-Hoon, 2002. "New Regionalism in East Asia: How Does It Relate to the East Asian Economic Development Model?," Economics Working Papers wp02-10, School of Economics, University of Wollongong, NSW, Australia.
    10. Ryuhei Wakasugi, 2007. "Vertical Intra-Industry Trade and Economic Integration in East Asia," Asian Economic Papers, MIT Press, vol. 6(1), pages 26-39, Winter.
    11. Horácio Faustino, 2008. "Intra-Industry Trade and Revealed Comparative Advantage: An Inverted-U Relationship," Working Papers Department of Economics 2008/03, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
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    Cited by:

    1. Phan, Thanh Hoan & Jeong, Ji Young, 2012. "An Analysis of Korea-Vietnam Bilateral Trade Relation," MPRA Paper 48312, University Library of Munich, Germany.

    More about this item


    Vertical Intra Industry Trade; product fragmentation; panel data;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F19 - International Economics - - Trade - - - Other
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models

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