TITLE:
An Essay on Intra-Industry Trade in Intermediate Goods
AUTHORS:
Rosanna Pittiglio
KEYWORDS:
Intermediate Goods, Intra-Industry Trade, Homogeneity Hypothesis, Fragmentation
JOURNAL NAME:
Modern Economy,
Vol.5 No.5,
May
19,
2014
ABSTRACT:
This
paper contributes to the debate on the effects of international fragmentation
on two-way trade in several ways. Firstly, it is the first study on
determinants of horizontal and vertical intraindustry trade in intermediate
goods with regard to Italy. Secondly, it studies if and how country-specific
factors affect intra-industry trade in intermediate goods when heterogeneity
among sectors is allowed. The topic is very important for its policy
implications. As is known, the early literature distinguishing vertical from
horizontal intra-industry trade is especially concerned that their determinants
are not the same, and that an expansion in two-way trade might have different
adjustment implications depending on its nature. In the case of input trade,
the same motivation applies (since intermediates are a subset of total goods
traded) but to a greater extent. The analysis, on the one hand has produced
results that support the theoretical hypotheses, on the other hand has
confirmed the relevance of considering intersectoral heterogeneity in analyzing
determinants of intra-industry trade in intermediate goods.