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Intra-industry Trade of Transition Countries: Trends and Determinants

  • Yener Kandogan

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    This paper analyzes trends in different components of trade of transition countries. To explain the cross-country differences, the paper points out the important distinction between the determinants of inter-industry trade and intra-industry trade (IIT), and horizontal and vertical IIT. Using varieties of gravity models, it is shown that variables from Increasing Returns Trade Theory, such as scale economies, similarity of income levels, and number of varieties produced play important roles in IIT, especially in horizontal IIT, whereas factors such as comparative advantage, dissimilarity in income levels, and having more developed trade partners of Heckscher-Ohlin Trade Theory are crucial in determining inter-industry trade and vertical IIT to a lesser degree.

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    File URL: http://www.wdi.umich.edu/files/Publications/WorkingPapers/wp566.pdf
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    Paper provided by William Davidson Institute at the University of Michigan in its series William Davidson Institute Working Papers Series with number 2003-566.

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    Length: 27 pages
    Date of creation: 26 Jun 2003
    Date of revision:
    Handle: RePEc:wdi:papers:2003-566
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    1. Bergstrand, Jeffrey H, 1985. "The Gravity Equation in International Trade: Some Microeconomic Foundations and Empirical Evidence," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 474-81, August.
    2. Don Clark, 1993. "Recent evidence on determinants of intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 129(2), pages 332-344, June.
    3. Greenaway, David & Torstensson, Johan, 1997. "Economic Geography, Comparative Advantage and Trade within Industries: Evidence from the OECD," Working Paper Series 144, Trade Union Institute for Economic Research.
    4. Alan Deardorff, 1998. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," NBER Chapters, in: The Regionalization of the World Economy, pages 7-32 National Bureau of Economic Research, Inc.
    5. Simon J. Evenett & Wolfgang Keller, 2002. "On Theories Explaining the Success of the Gravity Equation," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 281-316, April.
    6. 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.
    7. Anderson, James E, 1979. "A Theoretical Foundation for the Gravity Equation," American Economic Review, American Economic Association, vol. 69(1), pages 106-16, March.
    8. Bergstrand, Jeffrey H, 1989. "The Generalized Gravity Equation, Monopolistic Competition, and the Factor-Proportions Theory in International Trade," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 143-53, February.
    9. Y. Kandogan, 2003. "Reconsidering the adjustment costs of the Europe agreements," Applied Economics Letters, Taylor & Francis Journals, vol. 10(2), pages 63-68.
    10. Durkin, John T, Jr & Krygier, Markus, 1998. "Comparative Advantage and the Pattern of Trade within Industries," Review of International Economics, Wiley Blackwell, vol. 6(2), pages 292-306, May.
    11. Bergstrand, Jeffrey H, 1990. "The Heckscher-Ohlin-Samuelson Model, the Linder Hypothesis and the Determinants of Bilateral Intra-industry Trade," Economic Journal, Royal Economic Society, vol. 100(403), pages 1216-29, December.
    12. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    13. Gilroy, Bernard Michael & Broll, Udo, 1988. "Intra-Industry Trade and Differences in Technology," MPRA Paper 18710, University Library of Munich, Germany.
    14. Greenaway, David & Hine, Robert C & Milner, Chris, 1995. "Vertical and Horizontal Intra-industry Trade: A Cross Industry Analysis for the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(433), pages 1505-18, November.
    15. Deardoff, A.V., 1995. "Determinants of Bilateral Trade: Does Gravity Work in a Neoclassical World?," Working Papers 382, Research Seminar in International Economics, University of Michigan.
    16. Davis, Donald R., 1995. "Intra-industry trade: A Heckscher-Ohlin-Ricardo approach," Journal of International Economics, Elsevier, vol. 39(3-4), pages 201-226, November.
    17. 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.
    18. Bhattacharyya, Ranajoy, 2002. "Vertical and Horizontal Intra Industry Trade in Some Asian and Latin American Less Developed Countries," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 17, pages 273-296.
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