The measurement of intra-industry trade between unequal partners

Weltwirtschaftliches Archiv 02/1997; 133(3):554-565. DOI: 10.1007/BF02707503
Source: RePEc

ABSTRACT Summary This note argues that the inadequacy of the GL index to correctly reflect the level of intra-industry trade in presence of
trade imbalances may partly be due to measuring intra-industry trade between countries with large differences in economic
size. Several adjustment procedures have been suggested in the literature but it is demonstrated that none of the alternative
measures seem capable of eliminating the problem. A new measure of intra-industry trade is proposed in which the bilateral
level of intra-industry trade is divided by the total number of products traded between two countries to yield an average
level of intra-industry trade per product. This measure may also be applied at industry level, and in contrast to the GL index,
it is highly correlated with the actual level of intra-industry trade.

In studies of intra-industry trade, one should cautiously interpret the GL index since it may give a false picture of the
extent and the volume of intra-industry trade. If the standard GL index is used, it is suggested that also alternative measures
of intra-industry trade are employed to complement the GL index in order to correctly observe the true extent of intra-industry

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    ABSTRACT: The article analyses patterns and country-specific determinants of Visegrad Countries' agri-food trade with the European Union. Literature focusing on the country-specific determinants of vertical and horizontal intra-industry trade is rather limited and those analysing agricultural (or agri-food) trade are extremely rare. Therefore, the paper seeks to contribute to the literature by covering the latest theories and data available on the topic to provide up to date results and suggestions. Moreover, it seeks to identify the determinants of horizontal and vertical intra-industry trade of the Visegrad Countries after EU accession. According to the results determinants of horizontal and vertical intra-industry differ and suggest that economic size is positively, while distance is negatively related to both sides of intra-industry trade. However, the relationship between vertical intra-industry trade and differences in factor endowments as well as foreign direct investment is ambiguous.
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    ABSTRACT: This article investigates the drivers of vertical intra-industry trade (VIIT) in Hungarian agri-food trade with the European Union (EU). It identifies three possible ways to measure intra-industry trade (IIT) flows (GHM, FF, and N methods) and defines six hypotheses to test for the drivers of VIIT with three panel data models (static, dynamic, and FEVD). The results suggest that factor endowments are negatively, while economic size is positively and significantly related to VIIT. Distance and VIIT were found to be negatively related as is commonly the case in the standard gravity model. It was also found that VIIT is greater if a New Member State (NMS) is exporting agri-food produce to an NMS, while EU accession has ambiguously influenced the share of VIIT. In general, it seems that our results are independent from model estimations and interestingly they do not differ considerably as we a priori expected. Moreover, our results seem surprisingly robust across various measurements of ITT.
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Jun 6, 2014