India’s Intra-industry Trade: Implication on Vertical Specialization, Environment and Employment

Paramita Dasgupta () and Kakali Mukhopadhyay ()
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Paramita Dasgupta: Ananda Chandra College
Kakali Mukhopadhyay: Gokhale Institute of Politics and Economics

A chapter in Applications of the Input-Output Framework, 2018, pp 315-344 from Springer

Abstract: Abstract India’s IIT has grown in importance after the adoption of trade liberalization measures in 1991. This chapter tries to assess India’s IIT by considering different aspects, like vertical specialization associated with IIT, the impact of IIT on environment and employment. The analysis focuses on India’s bilateral IIT with the USA, EU (27) and China during 2001–02 to 2015–16. The study finds that share of IIT in total trade between India and its trade partners is increasing. India’s IIT is dominated by the products which are differentiated vertically (VIIT). This might be an indication of vertical specialization and the country’s increasing participation in global production network. Results also reveal low-quality VIIT dominates in trade with the USA and EU (27). In trade with China, both low-quality and high-quality VIITs are found to be equally important, though the share of low-quality varieties is rising. Regarding environmental impact of IIT, values of PTOT are greater than one in most of the cases implying India being a pollution haven. In trade with China, pollution intensity of export component of IIT has shown an upward trend over the study period. Regarding employment generation, IIT has a positive impact on the labour market, particularly in trade with EU (27) and China. As India is found to be specializing mostly in the varieties of lower quality which are unskilled labour-intensive, promotion of IIT could lead to an inclusive growth in an unskilled labour-surplus economy like India.

Keywords: Intra-industry trade; Vertical IIT; Horizontal IIT; Input–output framework; Grubel–Lloyd index; Pollution haven; Pollution terms of trade; Labour employment; India’s foreign trade (search for similar items in EconPapers)
JEL-codes: F18 Q56 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-981-13-1507-7_12

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DOI: 10.1007/978-981-13-1507-7_12

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