Determinants of United States’ Vertical and Horizontal Intra-Industry Trade

Michael William Thorpe and Nuno Carlos Leitão ()
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Michael William Thorpe: Department of Economics, Curtin Business School, Perth, WA 6845, Australia
Nuno Carlos Leitão: Department of Economics, Polytechnic Institute of Santarém, and CEFAGE, Èvora University, Evora, Portugal

Global Economy Journal (GEJ), 2013, vol. 13, issue 2, 233-250

Abstract: This paper investigates bilateral intra-industry trade between the United States and its major trading partners over the period 1995–2008. Intra-industry trade (IIT) is decomposed into horizontal (HIIT) and vertical (VIIT) components. HIIT dominates the total two-way trade of the United States and its share relative to VIIT has been rising over time, particularly with neighbouring trade partners and with China. Using pooled panel data, country-level determinants of IIT, HIIT and VIIT are investigated. The results, overall, tend to conform with a priori expectations and provide empirical support for a number of propositions suggested by theory. Findings indicate that the relative similarity of the economies of trading partners, their geographical proximity, FDI and overall market size are important influences on bilateral HIIT flows for the United States. VIIT, on the other hand, is found to be driven in large part by economic differences between partners as well as the market size and closeness of trading partners.

Keywords: intra-industry trade; horizontal intra-industry trade; vertical intra-industry trade; United States; F14; F12; C20 (search for similar items in EconPapers)
Date: 2013
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DOI: 10.1515/GEJ-2013-0019

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