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Endowment Differences and the Composition of Intra-Industry Trade

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Abstract

This paper investigates the relationship between differences in endowments and different types of trade, in particular vertical intra-industry trade (VIIT). We build a general equilibrium framework based on a hybrid of the Chamberlain-Heckscher-Ohlin and the specific factors models that generates predictions about how the shares of different types of intra-industry and net trade flows change with differences in endowments. We also present some empirical evidence for European Union trade with its 51 major trading partners. The econometric models of the determinants of the different types of trade confirm the theoretical predictions, namely that the effect of cross country differences in the endowments of trading partners on the share of vertical IIT in total bilateral trade differs from their effect on both horizontal IIT and net trade. The share of horizontal IIT (net trade) decreases (increases) for all increases in absolute endowment differences, but the share of vertical IIT can both increase and decrease with increases in endowment differences.

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  • Manuel Cabral & Rod Falvey & Chris Milner, "undated". "Endowment Differences and the Composition of Intra-Industry Trade," Discussion Papers 08/36, University of Nottingham, GEP.
  • Handle: RePEc:not:notgep:08/36
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    Cited by:

    1. J. Hanna & L. Lévi & S. Petit, 2015. "Intra-tourism trade, income distribution and tourism endowment: an econometric investigation," Applied Economics, Taylor & Francis Journals, vol. 47(21), pages 2184-2200, May.
    2. Michael Benarroch & James Gaisford, 2014. "Intra-industry Trade Liberalization and the Environment," Review of International Economics, Wiley Blackwell, vol. 22(5), pages 886-904, November.
    3. repec:eee:jeeman:v:83:y:2017:i:c:p:50-67 is not listed on IDEAS
    4. Roy, Jayjit, 2017. "On the environmental consequences of intra-industry trade," Journal of Environmental Economics and Management, Elsevier, vol. 83(C), pages 50-67.

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    Keywords

    Intra-industry trade; factor endowments;

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