Intra-Industry Trade: A Static and Dynamic Panel Data Analysis

Abstract

This study examines the features and determinants of intra-industry trade (IIT), horizontal IIT (HIIT) and vertical IIT (VIIT) between Portugal and the European Union in the period 1996–2002, using a static and a dynamic panel data analysis. The findings indicate that Portuguese VIIT increased significantly during the period in accordance with the values expected for a developed country. The regression results show that there is evidence supporting the explanation of VIIT by Heckscher–Ohlin’s (HO) theory and that Portugal has comparative advantages in low-quality differentiated products. The findings support the theory that, in general, there is no positive statistical association between HIIT and HO variables. The central theme of this paper is to show that it may be preferable to use the GMM approach in empirical studies of IIT rather than pooled OLS, fixed effects or random effects estimators. The results also suggest that the GMM system estimator obtains more reasonable parameter estimates than the first-differenced GMM estimator. Copyright International Atlantic Economic Society 2007Intra-industry trade, Horizontal intra-industry trade, Vertical intra-industry trade, Comparative advantage, Dynamic panel data, GMM-SYS Estimator, GMM-DIF Estimator, C20, C30, F12, L10,

Country- and industry-specific determinants of intra-industry trade in agri-food products in the Visegrad countries

“…In general, it is also observable that the three indices produce quite similar results (Table 5). As another general observation, lagged variables are positive and signifi cant in all but one case, similarly to Faustino and Leitão (2007) and Leitão (2011), indicating that past performance plays an important role in present indices.…”

“…This hypothesis considers that the most productive sectors have higher levels of product differentiation. Previous studies (Faustino and Leitão, 2007) suggest positive signs for high-quality products and negative for low-quality ones. As the previous section suggests, low-quality agri-food trade prevails in trade among EU-28 Member States; therefore, a negative sign is expected here.…”

“…As to the VIIT equation, vertical product differentiation (VPD) had a positive impact on VIIT while FDI was negatively correlated with VIIT, showing that these variables are not complementary. Faustino and Leitão (2007) used static and dynamic panel data to analyse the determinants of IIT for the Portuguese economy for the period 1995-2002. The explanatory variables used were horizontal and vertical product differentiation, economies of scales, productivity and intensity of physical capital.…”

Country and industry specific determinants of intra-industry agri-food trade in the Baltic Countries

“…In general, it is also observable that the three indices produce quite similar results (Table 4). As another general observation, the lagged variables are positive and significant in all cases, similarly to Faustino and Leitão (2007) and Leitão (2011), indicating that the past performance plays and important role in the present indices.…”

“…Lee (1989) investigated intra-industry trade for thirteen Pacific countries and found that the product differentiation and FDI were positively related to IIT, while the industrial concentration and IIT were found to be inversely related. Faustino and Leitão (2007) were in search for the determinants of intra-industry trade for Portugal in 1995-2002 and suggested that the physical capital had a negative impact on vertical intra-industry trade, meaning that Portugal exported low-quality products to the European Union. Leitão and Faustino (2008) investigated intraindustry agri-food trade patterns for Portugal in 1995-2003 and found that the economies of scales had a positive, while the industrial concentration had a negative impact on IIT.…”