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 paper investigates the relationship between factor endowment and vertical intraindustry trade (IIT)in agri-food products between Hungary and the EU. Intra-industry trade is separated into its horizontal and vertical components on the basis of differences in unit values. Three different approaches to measuring IIT are employed and these are then tested using panel regression models. Results show vertical type trade is predominant in total IIT for agri-food products. In order to achieve more general results, we consider different types of productive factors: land, human and physical capital. Using Flam and Helpman type vertically differentiated trade models, we find a positive relationship between factor endowment and vertical IIT. More importantly, using a measure of IIT that reflects the level of trade produces better regression results than those based on the degree or share of IIT.
    Journal of Agricultural Economics 09/2005; 56(1):117 - 134. · 1.50 Impact Factor
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    ABSTRACT: Intra-industry trade in agri-food products between Hungary and the EU is shown to be low and dominated by vertically rather than horizontally differentiated products, suggesting higher economic adjustment costs. Following recent empirical studies, we then test econometrically for the determinants of this trade using different measures of horizontal and vertical trade, and employing an array of popular explanatory variables. Results suggest that separating the measure of intra-industry trade into vertical and horizontal provides for better estimation and supports the contention that the determinants may differ by type of trade. In the regression analysis, the level of intra-industry trade is found to serve as a better dependent variable than the degree or share of intra-industry trade.
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    ABSTRACT: The main purpose of this study is to investigate the country-specific determinants of horizontal and vertical intra-industry trade (IIT) in South Africa using the gravity model of trade in a panel data setting. It empirically tests new and existing country-specific hypotheses of intra-industry trade. Copyright 2005 Economic Society of South Africa.
    South African Journal of Economics 01/2005; 73(3):406-425. · 0.43 Impact Factor


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Jun 6, 2014