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Country-Specific Determinants of Intra-Industry Trade - The Case of France

Kinnerup, Kristina (2005)
Department of Economics
Abstract
Theories lead to contradictory hypotheses regarding the determinants of vertical and horizontal IIT. Hence, in order to be able to investigate the country-specific determinants of VIIT and HIIT, it is important to empirically delimit the two from each other. This study employs the traditional Grubel and Lloyd measure of intra-industry trade, unadjusted for trade imbalance, and the method developed by Abd-el-Rahman to distinguish between vertical and horizontal IIT. Concerning HIIT, hypotheses derived from the CHOS model are tested, whereas the Falvey and Kierzkowski model is chosen for VIIT. Among other things, the regression results show that an increased average per capita income or an increased trade intensity has a positive,... (More)
Theories lead to contradictory hypotheses regarding the determinants of vertical and horizontal IIT. Hence, in order to be able to investigate the country-specific determinants of VIIT and HIIT, it is important to empirically delimit the two from each other. This study employs the traditional Grubel and Lloyd measure of intra-industry trade, unadjusted for trade imbalance, and the method developed by Abd-el-Rahman to distinguish between vertical and horizontal IIT. Concerning HIIT, hypotheses derived from the CHOS model are tested, whereas the Falvey and Kierzkowski model is chosen for VIIT. Among other things, the regression results show that an increased average per capita income or an increased trade intensity has a positive, significant influence on the level of HIIT as predicted by theory. There are variables that are significant but have signs that are not in line with expectations: difference in human capital has a positive effect on HIIT and the average market size has a negative effect. Most explanatory variables have signs contrary to expectations. The overall explanatory power of the equations is nevertheless about 0,24. When it comes to vertical IIT, no explanatory variables are significant except for trade intensity, that has a positive effect on VIIT. The explanatory power is 0,008 at the most. Another purpose of this paper is to examine France's total, vertical and horizontal IIT with the world between 1990 and 1998. Among other things, it is revealed that France increases its levels of vertical IIT in the period, whereas the levels of horizontal IIT remain roughly the same. France's vertical IIT is much more important than its horizontal IIT; France has more vertical than horizontal IIT with each country in almost every year in the period. France's horizontal IIT is most important with the industrialized countries, especially the ones close to France. However, when it comes to vertical IIT, France has high levels with both industrialized countries and with developing countries far away. (Less)
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@misc{1334655,
  abstract     = {Theories lead to contradictory hypotheses regarding the determinants of vertical and horizontal IIT. Hence, in order to be able to investigate the country-specific determinants of VIIT and HIIT, it is important to empirically delimit the two from each other. This study employs the traditional Grubel and Lloyd measure of intra-industry trade, unadjusted for trade imbalance, and the method developed by Abd-el-Rahman to distinguish between vertical and horizontal IIT. Concerning HIIT, hypotheses derived from the CHOS model are tested, whereas the Falvey and Kierzkowski model is chosen for VIIT. Among other things, the regression results show that an increased average per capita income or an increased trade intensity has a positive, significant influence on the level of HIIT as predicted by theory. There are variables that are significant but have signs that are not in line with expectations: difference in human capital has a positive effect on HIIT and the average market size has a negative effect. Most explanatory variables have signs contrary to expectations. The overall explanatory power of the equations is nevertheless about 0,24. When it comes to vertical IIT, no explanatory variables are significant except for trade intensity, that has a positive effect on VIIT. The explanatory power is 0,008 at the most. Another purpose of this paper is to examine France's total, vertical and horizontal IIT with the world between 1990 and 1998. Among other things, it is revealed that France increases its levels of vertical IIT in the period, whereas the levels of horizontal IIT remain roughly the same. France's vertical IIT is much more important than its horizontal IIT; France has more vertical than horizontal IIT with each country in almost every year in the period. France's horizontal IIT is most important with the industrialized countries, especially the ones close to France. However, when it comes to vertical IIT, France has high levels with both industrialized countries and with developing countries far away.},
  author       = {Kinnerup, Kristina},
  keyword      = {Vertical intra-industry trade,horizontal intra-industry trade,France,country-specific determinants,the Falvey and Kierzkowski model,the Chamberlin-Heckscher-Ohlin-Samuelson (CHOS) model.,Economics, econometrics, economic theory, economic systems, economic policy,Nationalekonomi, ekonometri, ekonomisk teori, ekonomiska system, ekonomisk politik},
  language     = {eng},
  note         = {Student Paper},
  title        = {Country-Specific Determinants of Intra-Industry Trade - The Case of France},
  year         = {2005},
}