Country-Specific Determinants of Intra-Industry Trade in Portugal

Horácio Faustino (faustino@iseg.ulisboa.pt) and Nuno Leitão

No 2007/27, Working Papers Department of Economics from ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa

Abstract: Based on the theoretical models of Helpman and Krugman (1985), Falvey and Kierzkowski (1987) and Flam and Helpman (1987) and on the empirical studies of Greenaway, Hine and Milner (1994) and Hummels and Levinsohn (1995), we use a static and dynamic panel data approach to test the country-specific determinants of Portuguese intra-industry trade (IIT). We include income variables together with supply-side variables in order to test the demand similarity and factor endowments difference hypotheses. The results suggest that the Linder hypothesis is confirmed and that differences in income levels have a positive (negative) effect on vertical IIT (horizontal IIT and IIT). However, our findings only partially confirm Helpman and Krugman’s theoretical predictions.

Keywords: intra-industry trade; horizontal intra-industry trade; vertical intra-industry trade; Linder hypothesis; dynamic panel data. (search for similar items in EconPapers)
JEL-codes: C2 C3 F12 L1 (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (3)

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