Intra-industry trade between European Union and Transition Economies. Does income distribution matter?

Hubert Gabrisch and Maria Luigia Segnana

No 155/2002, IWH Discussion Papers from Halle Institute for Economic Research (IWH)

Abstract: EU-TE trade is increasingly characterised by intra-industry trade. For some countries (Czech Republic), the share of intra-industry trade in total trade with the EU approaches 60 percent. The decomposition of intra-industry trade into horizontal and vertical shares reveals overwhelming vertical structures with strong quality advantages for the EU and shrinking quality advantages for TE countries wherever trade has been liberalised. Empirical research on factors determining this structure in an EU-TE framework has lagged theoretical and empirical research on horizontal trade and vertical trade in other regions of the world. The main objective of this paper is, therefore, to contribute to the ongoing debate over EU-TE trade structures, by offering an explanation of intra-industry trade. We utilize a cross-country approach in which relative wage differences and country size play a leading role. In addition, as implied by a model of the productquality cycle, we examine income distribution factors as determinates of the emerging EU-TE structure of trade flows. Using OLS regressions, we find first, that relative differences in wages (per capita income) and country size explain intra-industry trade, when trade is vertical and completely liberalized and second, that cross country differences in income distribution play no explanatory role. We conclude that if increasing wage differences resulted from an increasing productivity gap between highquality and low-quality industries, then vertical structures will, over the long-term create significant barriers for the increase in TE incomes and lowering EU-TE income differentials.

Keywords: intra-industry trade; Eastern Europe (search for similar items in EconPapers)
JEL-codes: F13 (search for similar items in EconPapers)
Date: 2002
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/77059/1/155.pdf (application/pdf)

Related works:
Working Paper: Intra-industry Trade between European Union and Transition Economies: Does Income Distribution Matter? (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:iwhdps:iwh-155

Access Statistics for this paper

More papers in IWH Discussion Papers from Halle Institute for Economic Research (IWH) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics (econstor@zbw-workspace.eu).