Intra-industry trade and regional integration
The link between regional integration and intra-industry trade (IIT) has been under scrutiny since it has been first suggested by the European integration process. However, the lack of reliable data and the difficulty to find a robust model for IIT made this relationship difficult to prove. This paper tackles this issue using an harmonised dataset at the most detailed level of product disaggregation on a worldwide basis from the beginning of the 1990s to 2002. We study the case of four de jure or de facto integration zones: the European Union, NAFTA, Mercosur and East Asia. Trade flows are classified as inter- or intra-industry trade and IIT is broken down into horizontal and vertical components. Trade patterns for each zone are studied using a harmonized database drawing on the most detailed information available. The determinants of the share of vertical and horizontal IIT are investigated. A robust positive relationship is found between regional integration and intra-industry trade, both vertically and horizontally differentiated.
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