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Horizontal and vertical intra-industry trade of Nafta and Mercosur: The case of the automobile industry

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  • Montout, Sylvie
  • Mucchielli, Jean-Louis
  • Zignago, Soledad

Abstract

The NAFTA and MERCOSUR agreements seem to have accelerated the regional integration process respectively within North and South of America. In the South in particular, MERCOSUR has led to trade liberalisation and deregulation, which has resulted in significant growth of its regional trade. In this article, we study the pattern of that trade growth in the automobile industry. Our results highlight an increase of intra-industry trade in the corresponding industry since the beginning of the 1990s. Firstly, we use the Grubel and Lloyd indicator (1975). Secondly, following Abd-el-Rahman (1991), Greenaway et al. (1995), Fontagné and Freudenberg (1997), we distinguish horizontally differentiated goods from vertically differentiated goods using a comparison of the unit values. With the increase of intra-industry trade, it appears that MERCOSUR has favoured in particular the development of trade in vertically differentiated goods. In NAFTA, intra-industry trade exists in most sectors and in two bilateral relations (US-Canada and US-Mexico). In MERCOSUR, the automobile industry has experienced the highest rate of growth in intraindustry trade, which accounts for 66% of total trade and 90% of all intra-regional trade. Thirdly, we analyse the nature of that increase and more precisely, the determinants of intra-industry trade. In order to explain the pattern of trade for the automobile industry, we use a gravity-type model taking into account some country-specific variables.

Suggested Citation

  • Montout, Sylvie & Mucchielli, Jean-Louis & Zignago, Soledad, 2001. "Horizontal and vertical intra-industry trade of Nafta and Mercosur: The case of the automobile industry," MPRA Paper 43928, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:43928
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    Cited by:

    1. Kemal Türkcan, 2009. "Vertical Intra-Industry Trade: An Empirical Examination of the Austria’s Auto-Parts Industry," FIW Working Paper series 030, FIW.
    2. Nuno Carlos Leitão & Horácio C. Faustino & Yushi Yoshida, 2010. "Fragmentation, Vertical Intra-Industry Trade, and Automobile components," Economics Bulletin, AccessEcon, vol. 30(2), pages 1006-1015.
    3. Maylene Y. Damoense-Azevedo & André C. Jordaan, 2012. "Factors influencing bilateral intra-industry trade in the auto industry: the case of South Africa," International Journal of Economics and Business Research, Inderscience Enterprises Ltd, vol. 4(1/2), pages 63-82.
    4. Pittiglio, Rosanna, 2009. "The Intra-industry Trade for a Highincome Country: New Empirical Evidence for Italy," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 62(2), pages 233-254.
    5. Kemal Türkcan, 2011. "Vertical Intra-Industry Trade and Product Fragmentation in the Auto-Parts Industry," Journal of Industry, Competition and Trade, Springer, vol. 11(2), pages 149-186, June.

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    More about this item

    Keywords

    Intra-Industry Trade; Regional Integration; NAFTA; MERCOSUR; Automotive Industry;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F10 - International Economics - - Trade - - - General
    • L62 - Industrial Organization - - Industry Studies: Manufacturing - - - Automobiles; Other Transportation Equipment; Related Parts and Equipment
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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