Vertical Intra-Industry Trade and Foreign Direct Investment in East Asia

Kyoji Fukao, 京司 深尾, キョウジ フカオ, Hikari Ishido, 光 石戸, ヒカリ イシド, Keiko Ito and 恵子 伊藤

No a434, Discussion Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: As economic integration in East Asia progresses, trade patterns within the region are displaying an ever-greater complexity: Though inter-industry trade still accounts for the majority, its share in overall trade is declining. Instead, intra-industry trade (IIT), which can be further divided into horizontal IIT (HIIT) and vertical IIT (VIIT), is growing in importance. In this paper, we set out to measure and examine vertical intra-industry trade patterns in the East Asian region and compare these with the results of previous studies focusing on the EU, to which such analyses so far have been confined. Based on the supposition that VIIT is closely related to offshore production by multinational enterprises, we then develop a model to capture the main determinants of VIIT that explicitly includes the role of FDI. The model is tested empirically using data from the electrical machinery industry. The findings support our hypothesis, showing that FDI plays a significant role in the rapid increase in VIIT in East Asia seen in recent years.

Keywords: Vertical Intra-Industry Trade; Vertical Foreign Direct Investment; East Asia; European Union (search for similar items in EconPapers)
JEL-codes: F14 F23 (search for similar items in EconPapers)
Pages: 57 pages
Date: 2003-01
New Economics Papers: this item is included in nep-ifn and nep-ind
Note: Revised Version, January 2003, Bibliography: p. 31-33
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (151)

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Related works:
Journal Article: Vertical intra-industry trade and foreign direct investment in East Asia (2003)
Working Paper: Vertical Intra-Industry Trade and Foreign Direct Investment in East Asia (2003)
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Persistent link: https://EconPapers.repec.org/RePEc:hit:hituec:a434

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