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Determinants of intra-industry trade between East and West Europe (English)

Intra-industry trade as a share of total trade between Central and Eastern European nations and the European Union (EU) is among the highest of all the EU's bilateral trade flows. The authors break down data on these trade flows into horizontal and vertical components, and investigate the determinants of each. They find that vertical intra-industry trade (the exchange of similar goods of different quality) accounts for 80 to 90 percent of total intra-industry trade. It is positively associated with product differentiation, labor intensity of production, economies of scale, and foreign direct investment. Controlling for country effects, they find a statistically significant positive association between horizontal intra-industry trade (the exchange of close substitutes of similar quality) and foreign direct investment, product differentiation, and industry concentration. They find a significant negative relationship for economies of scale and labor intensity. These results do not hold if they do not control for country effects, suggesting that country-specific factors are key determinants of horizontal intra-industry trade.

Details

  • Author

    Aturupane, Chonira Djankov, Simeon Hoekman, Bernard

  • Document Date

    1997/11/30

  • Document Type

    Policy Research Working Paper

  • Report Number

    WPS1850

  • Volume No

    1

  • Total Volume(s)

    1

  • Country

    Europe and Central Asia,

  • Region

    Europe and Central Asia,

  • Disclosure Date

    2010/07/01

  • Doc Name

    Determinants of intra-industry trade between East and West Europe

  • Keywords

    minimum efficient scale of production;per capita income level;Profit and Loss Statement;product differentiation;foreign direct investment;economies of scale;returns to scale;market structure;flow of technology;horizontal intraindustry trade;vertical intraindustry trade;data on income;pattern of trade;movement of people;goodness of fit;share of labor;consistent standard error;volume of trade;value of exports;works of art;labor intensity;goods for export;literature review;economic policy research;scale economy;trade flow;empirical literature;explanatory variable;monopolistic competition;descriptive statistic;industry concentration;negative relationship;total trade;real wage;geographic proximity;selection bias;export structure;trading partner;product category;coefficient estimate;positive correlation;international economics;high share;correlation matrix;explanatory power;managerial incentive;differentiated products;bilateral trade;independent variable;comparable skill;imperfect competition;concentration ratio;comparator country;regression analysis;comparative advantage;multinational activity;central planning;international competition;estimation result;human capital;capital flow;labor utilization;industrial country;energy intensity;export market;product quality;explanatory factors;cross-section regression;gross value;firm sale;multinational trade;trade pattern;labor-intensive sectors;regression results;single market;energy intensities;high energy;random disturbance;commercial policy;regression coefficient;Cross Industry;quality differentiation;high correlation;policy variable;strategic investor;plant level;manufacturing industry;large enterprise;formal sector;robustness check;market power;missing observation;ownership status;equity stake;summary statistic;Corporate Law;foreign national;industrial census;empirical work;factor endowment;export flow;musical instrument;regression model;power production;data limitation;relative price;empirical support;foreign country;production facility;econometric analysis;increasing return;technological knowledge;home countries;home country;intermediate input;net export;negative sign;trade model;theoretical model;relative income;industrialized country;Industrialized countries;foreign investor;energy subsidies;basic metal;Political Economy;foreign producer;international economy;

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Citation

Aturupane, Chonira Djankov, Simeon Hoekman, Bernard

Determinants of intra-industry trade between East and West Europe (English). Policy, Research working paper ; no. WPS 1850 Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/322481468770987945/Determinants-of-intra-industry-trade-between-East-and-West-Europe