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Splitting and Measuring Intra-Industry Trade

Gullstrand, Joakim LU (2002) In Lund Economic Studies no. 98.
Abstract (Swedish)
Popular Abstract in Swedish

Avhandlingens syfte är att lyfta fram och analysera tre viktiga ämnen inom inombranschhandel; relevansen för efterfrågemönster, distinktionen mellan horisontell och vertikal inombranschhandel, och mätmetoden av inombranschhandel.



Kapitel två analyserar inombranschhandel mellan hög- och låginkomstländer, och använder ett teoretiskt ramverk som förklarar bytet av liknande produkter med olika kvalitetsnivåer. Vi är speciellt intresserad av vilken roll inkomstfördelningen samt den genomsnittliga inkomstnivån har som efterfrågedeterminanter till vertikal inombranschhandel. Vi testar hypoteser om skillnader i inkomstfördelning, skillnader i genomsnittlig inkomstnivå och genomsnittlig... (More)
Popular Abstract in Swedish

Avhandlingens syfte är att lyfta fram och analysera tre viktiga ämnen inom inombranschhandel; relevansen för efterfrågemönster, distinktionen mellan horisontell och vertikal inombranschhandel, och mätmetoden av inombranschhandel.



Kapitel två analyserar inombranschhandel mellan hög- och låginkomstländer, och använder ett teoretiskt ramverk som förklarar bytet av liknande produkter med olika kvalitetsnivåer. Vi är speciellt intresserad av vilken roll inkomstfördelningen samt den genomsnittliga inkomstnivån har som efterfrågedeterminanter till vertikal inombranschhandel. Vi testar hypoteser om skillnader i inkomstfördelning, skillnader i genomsnittlig inkomstnivå och genomsnittlig marknadsstorlek med hjälp av tre olika empiriska tillvägagångssätt. En metod är att agregera till landnivå, en annan är att analysera ett flertal sektorer simultant, den tredje är att fokusera på specifika sektorer. Resultatet påvisar att inkomstfördelningen och den genomsnittliga inkomstnivån, samt en interaktion mellan dessa, är viktiga bestämmande faktorer till handelsmönstret. Givet en distinkt kvalitetsuppdelning i produktionsmönstret mellan hög- och låginkomstländer kommer en mer jämn (ojämn) inkomstfördelning i den tidigare (senare) landtypen, så länge skillnaden i genomsnittlig inkomstnivå inte exkluderar en efterfrågeöverlappning, innebära en ökning i andelen vertikal inombranschhandel. Slutligen finner vi även att stödet för Linder-hypotesen beror på inkomstfördelningen. Desto större del av inkomsten som tilldelas den inkomstgrupp som efterfrågar kvalitetsnivån som produceras av handelspartnern, desto större sannolikhet att Linder-hypotesen gäller.



Kapitel tre integrerar horisontell och vertikal inombranschhandel i ett och samma ramverk, vilket innebär att vi kan använda oss av en alternativ metod, d.v.s. dra hypoteser om andelen horisontell inombranschhandel inom total inombranschhandel, för att testa de motsatta relationer horisontell och vertikal inombranschhandel antas ha med viktiga landspecifika faktorer. Den ekonometriska analysen stödjer motsatsförhållandet och understryker därmed vikten av att dela upp de olika typerna av inombranschhandel. Likhet i faktortillgångar, särskilt humankapital, och likheter i efterfrågemönster, mätt i inkomstnivå samt geografisk närhet, är viktiga bestämmande faktorer till andelen horisontell inombranschhandel i total inombranschhandel. Även marknadsstorleken har betydelse och vi fann att en interaktion mellan genomsnittlig marknadsstorlek och skillnaden i marknadsstorleken hade en stor betydelse för handelsmönstret.



Kapitel fyra diskuterar olika metoder för att empiriskt fånga särdragen i Chamberlin-Heckscher-Ohlin-Samuelson modellen och vi är speciellt intresserad av tre olika förfiningar av mätmetoden. Den ena är distinktionen mellan horisontell och vertikal inombranschhandel, den andra är justeringen av en snedvridning då data agregeras och den tredje är definitionen av mellan- samt inombranschspecialisering på produktnivå. Den empiriska specifikations förklaringsgrad var som högst då vi fokuserade på inombranschhandel i horisontellt differentierade varor, vilket understryker de resultat vi fann i kapitel två. Vi fann även stöd för att länken mellan andelen inombranschhandel och skillnader i relativa faktortillgångar försvagades då analysen inte tar hänsyn till specialiseringsmönstret på produktnivå. Slutligen fann vi en icke-lineär relation mellan stordriftsfördelar och inombranschhandel som kan förklara oklara och i vissa fall motstridiga resultat inom litteraturen. (Less)
Abstract
This thesis aims at shedding light on three important issues related to intra-industry trade (IIT); the relevance of demand patterns, horizontal versus vertical IIT, and the measurement of IIT.



Chapter two analyses IIT between high and low-income countries, and uses a theoretical model that explains the exchange of similar products of different qualities. We are particularly interested in the role of income distribution and average per capita income as demand-side determinants of vertical IIT, and test hypotheses on the role of differences in income distribution, differences in per capita income and average market size in three different empirical approaches; an economy-wide, a multi-industry, and a sector level... (More)
This thesis aims at shedding light on three important issues related to intra-industry trade (IIT); the relevance of demand patterns, horizontal versus vertical IIT, and the measurement of IIT.



Chapter two analyses IIT between high and low-income countries, and uses a theoretical model that explains the exchange of similar products of different qualities. We are particularly interested in the role of income distribution and average per capita income as demand-side determinants of vertical IIT, and test hypotheses on the role of differences in income distribution, differences in per capita income and average market size in three different empirical approaches; an economy-wide, a multi-industry, and a sector level approach. The results show evidence of the role of income distribution and per capita income, and that there is an important interaction between these two variables. Given a distinct production-pattern specialisation of quality levels between high and low-income countries, the share of vertical IIT increases as the income distribution becomes more equal (unequal) in the former (latter) country as long as the difference in average per capita income is not too large to exclude any overlap in demand. Finally, we find that the support for the Linder-hypothesis depends on the income pattern within trade partners; the larger the share of total income that is diverted towards income groups that demand quality varieties produced by partner countries, the more likely is the validity of the Linder-hypothesis.



Chapter three integrates horizontal and vertical IIT within a single theoretical framework, which implies that we can use an alternative approach, i.e. draw hypotheses about the share of horizontal IIT in total IIT, in order to test the opposite relationships that horizontal and vertical IIT have with important country-specific determinants. The econometric analysis supports the contradictory relationships. Similarities in factor proportions, especially human capital, and demand pattern, measured by per capita income levels and spatial closeness, are important determinants of the share of horizontal IIT in total IIT. Furthermore, market size matters and we found that the interaction between the average market size and the difference in market sizes is an important determinant of the share of horizontal IIT in total IIT.



Chapter four discusses different ways of capturing the main features of the Chamberlin-Heckscher-Ohlin-Samuelson model in an empirical measure. Of particular interest are three interrelated refinements; the distinction between horizontal and vertical IIT, the adjustment of aggregation biases, and the definition of inter and intra-industry specialisation at product level. The findings of this chapter underscore the findings of chapter three since our empirical specification of the model has the largest explanatory power when we focus on two-way flows in products defined as horizontally differentiated. Moreover, we find support for our concern about a weaker linkage between the share of IIT and factor endowment differences as long as we neglect trade overlaps within narrowly defined product groups. An additional finding of this study is a non-linear relationship between economies of scale and intra-industry trade that may explain unclear and sometimes contradictory results in the literature. (Less)
Please use this url to cite or link to this publication:
author
opponent
  • Professor Greenaway, David, University of Nottingham
organization
publishing date
type
Thesis
publication status
published
subject
keywords
economic policy, economic systems, economic theory, econometrics, Economies of Scale, Economics, Specialisation, Horizontal and Vertical Intra-Industry Trade, Income Distribution, Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik, Commercial and industrial economics, Industriell ekonomi
in
Lund Economic Studies
volume
no. 98
pages
114 pages
publisher
Department of Economics, Lund Universtiy
defense location
EC3:210 Holger Crafoords Ekonomicentrum
defense date
2002-02-09 10:15
ISSN
0460-0029
language
English
LU publication?
yes
id
4d64d335-3a5b-46a4-9025-2c271fbce944 (old id 464286)
date added to LUP
2007-09-27 11:26:13
date last changed
2016-09-19 08:44:52
@phdthesis{4d64d335-3a5b-46a4-9025-2c271fbce944,
  abstract     = {This thesis aims at shedding light on three important issues related to intra-industry trade (IIT); the relevance of demand patterns, horizontal versus vertical IIT, and the measurement of IIT.<br/><br>
<br/><br>
Chapter two analyses IIT between high and low-income countries, and uses a theoretical model that explains the exchange of similar products of different qualities. We are particularly interested in the role of income distribution and average per capita income as demand-side determinants of vertical IIT, and test hypotheses on the role of differences in income distribution, differences in per capita income and average market size in three different empirical approaches; an economy-wide, a multi-industry, and a sector level approach. The results show evidence of the role of income distribution and per capita income, and that there is an important interaction between these two variables. Given a distinct production-pattern specialisation of quality levels between high and low-income countries, the share of vertical IIT increases as the income distribution becomes more equal (unequal) in the former (latter) country as long as the difference in average per capita income is not too large to exclude any overlap in demand. Finally, we find that the support for the Linder-hypothesis depends on the income pattern within trade partners; the larger the share of total income that is diverted towards income groups that demand quality varieties produced by partner countries, the more likely is the validity of the Linder-hypothesis.<br/><br>
<br/><br>
Chapter three integrates horizontal and vertical IIT within a single theoretical framework, which implies that we can use an alternative approach, i.e. draw hypotheses about the share of horizontal IIT in total IIT, in order to test the opposite relationships that horizontal and vertical IIT have with important country-specific determinants. The econometric analysis supports the contradictory relationships. Similarities in factor proportions, especially human capital, and demand pattern, measured by per capita income levels and spatial closeness, are important determinants of the share of horizontal IIT in total IIT. Furthermore, market size matters and we found that the interaction between the average market size and the difference in market sizes is an important determinant of the share of horizontal IIT in total IIT.<br/><br>
<br/><br>
Chapter four discusses different ways of capturing the main features of the Chamberlin-Heckscher-Ohlin-Samuelson model in an empirical measure. Of particular interest are three interrelated refinements; the distinction between horizontal and vertical IIT, the adjustment of aggregation biases, and the definition of inter and intra-industry specialisation at product level. The findings of this chapter underscore the findings of chapter three since our empirical specification of the model has the largest explanatory power when we focus on two-way flows in products defined as horizontally differentiated. Moreover, we find support for our concern about a weaker linkage between the share of IIT and factor endowment differences as long as we neglect trade overlaps within narrowly defined product groups. An additional finding of this study is a non-linear relationship between economies of scale and intra-industry trade that may explain unclear and sometimes contradictory results in the literature.},
  author       = {Gullstrand, Joakim},
  issn         = {0460-0029},
  keyword      = {economic policy,economic systems,economic theory,econometrics,Economies of Scale,Economics,Specialisation,Horizontal and Vertical Intra-Industry Trade,Income Distribution,Nationalekonomi,ekonometri,ekonomisk teori,ekonomiska system,ekonomisk politik,Commercial and industrial economics,Industriell ekonomi},
  language     = {eng},
  pages        = {114},
  publisher    = {Department of Economics, Lund Universtiy},
  school       = {Lund University},
  series       = {Lund Economic Studies},
  title        = {Splitting and Measuring Intra-Industry Trade},
  volume       = {no. 98},
  year         = {2002},
}