Marginal Intra Industry Trade Expansion and Productivity Growth

Ville Kaitila

No 1164, Discussion Papers from The Research Institute of the Finnish Economy

Abstract: We use the concept of marginal intra-industry trade (MIIT) to analyse the effect of trade expansion on labour productivity growth across 23 EU countries and 94 manufacturing sectors in 1995-2005. The highest MIIT index values are found in sectors producing differentiated goods as well as in science and scale-intensive sectors, while the lowest are found in resource and labour-intensive sectors. Thus specialisation in sectors characterised by traditional comparative advantage has been associated with slower productivity growth. The results indicate that a trade-flow expansion characterised by intra-industry trade (high MIIT) is associated with faster productivity growth also after we control for the size in trade flow changes. Especially the increase in imports seems important. The analysis is mostly done using random-effects linear model specifications but further evidence is presented using several other estimation methods.

Keywords: productivity; growth; marginal intra-industry trade (search for similar items in EconPapers)
JEL-codes: C23 F1 J24 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2008
New Economics Papers: this item is included in nep-eff and nep-int
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