IDEAS home Printed from https://ideas.repec.org/a/spr/inecre/v54y2019i1d10.1007_s41775-019-00047-4.html
   My bibliography  Save this article

Investigating the composition of product-level specialization

Author

Listed:
  • Purba Mukerji

    (Connecticut College)

  • Arvind Panagariya

    (Columbia University)

Abstract

Intra-industry trade has practical implications for the extent of direct competition countries face. Our paper contributes to the literature by proposing a new index of intra-industry trade that incorporates information from product-level trade data. The new index categorizes trade as intra-industry only if exports and imports are close substitutes as measured by the average proximity of their prices. This criteria of qualifying as intra-industry trade is based on product characteristics unlike the traditional Grubel–Lloyd (GL) index which is based on the level of data aggregation. GL index rises automatically with data aggregation creating serious questions regarding its dependability as a reasonable measure. By capturing substitutability of exports and imports, the new measure remains true to the theoretical definition of intra-industry trade irrespective of the level of data aggregation. The new index estimates intra-industry trade was, on average, only 14% as compared to the 21% estimated by the GL index for the US between 1989 and 2001. Furthermore, the new index yields estimates that have no predictable relation to data aggregation and remain quite stable as the level of aggregation changes.

Suggested Citation

  • Purba Mukerji & Arvind Panagariya, 2019. "Investigating the composition of product-level specialization," Indian Economic Review, Springer, vol. 54(1), pages 3-18, June.
    • Handle: RePEc:spr:inecre:v:54:y:2019:i:1:d:10.1007_s41775-019-00047-4
    DOI: 10.1007/s41775-019-00047-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s41775-019-00047-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s41775-019-00047-4?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Falvey, Rodney E., 1981. "Commercial policy and intra-industry trade," Journal of International Economics, Elsevier, vol. 11(4), pages 495-511, November.
    2. Robert C. Feenstra & Robert E. Lipsey & Harry P. Bowen, 1997. "World Trade Flows, 1970-1992, with Production and Tariff Data," NBER Working Papers 5910, National Bureau of Economic Research, Inc.
    3. Antonio Aquino, 1978. "Intra-industry trade and inter-industry specialization as concurrent sources of International Trade in manufactures," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(2), pages 275-296, June.
    4. Timothy J. Kehoe & Kim J. Ruhl, 2013. "How Important Is the New Goods Margin in International Trade?," Journal of Political Economy, University of Chicago Press, vol. 121(2), pages 358-392.
    5. Helpman, Elhanan, 1987. "Imperfect competition and international trade : Opening remarks," European Economic Review, Elsevier, vol. 31(1-2), pages 77-81.
    6. Elhanan Helpman, 1999. "The Structure of Foreign Trade," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 121-144, Spring.
    7. Jagdish Bhagwati & Arvind Panagariya & T. N. Srinivasan, 1998. "Lectures on International Trade, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262522470, December.
    8. Lancaster, Kelvin, 1980. "Intra-industry trade under perfect monopolistic competition," Journal of International Economics, Elsevier, vol. 10(2), pages 151-175, May.
    9. Helpman, Elhanan, 1981. "International trade in the presence of product differentiation, economies of scale and monopolistic competition : A Chamberlin-Heckscher-Ohlin approach," Journal of International Economics, Elsevier, vol. 11(3), pages 305-340, August.
    10. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-959, December.
    11. Helpman, Elhanan, 1987. "Imperfect competition and international trade: Evidence from fourteen industrial countries," Journal of the Japanese and International Economies, Elsevier, vol. 1(1), pages 62-81, March.
    12. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
    13. repec:bla:ecorec:v:47:y:1971:i:120:p:494-517 is not listed on IDEAS
    14. Purba Mukerji, 2009. "Trade Liberalization And The Extensive Margin," Scottish Journal of Political Economy, Scottish Economic Society, vol. 56(2), pages 141-166, May.
    15. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    16. Purba Mukerji, 2013. "Distance to Frontier and New Import Growth," Scottish Journal of Political Economy, Scottish Economic Society, vol. 60(4), pages 390-411, September.
    17. Peter K. Schott, 2004. "Across-Product Versus Within-Product Specialization in International Trade," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(2), pages 647-678.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Horácio Faustino & Nuno Leitão, 2007. "Intra-Industry Trade: A Static and Dynamic Panel Data Analysis," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 13(3), pages 313-333, August.
    2. Muhammad Shahbaz & Nuno Carlos Leit o & Muhammad Sabihuddin Butt, 2012. "Pakistan Intra-Industry Trade: A Panel Data Approach," International Journal of Economics and Financial Issues, Econjournals, vol. 2(2), pages 225-232.
    3. Clark, Don P., 2010. "Scale economies and intra-industry trade," Economics Letters, Elsevier, vol. 108(2), pages 190-192, August.
    4. repec:kap:iaecre:v:13:y:2007:i:3:p:313-333 is not listed on IDEAS
    5. Sourish Dutta, 2023. "Horizontal and Vertical Differentiation: Approaching Endogenous Measurement in Intra-industry Trade," Papers 2307.10660, arXiv.org, revised Aug 2023.
    6. Dutta, Sourish, 2022. "Two Approaches of Measuring Intra-industry Trade," EconStor Preprints 259000, ZBW - Leibniz Information Centre for Economics.
    7. Hartman, Darcy A. & Henderson, Dennis R. & Sheldon, Ian M., 1993. "A Cross-Section Analysis Of Intra-Industry Trade In The U.S. Processed Food And Beverage Sectors," Journal of Food Distribution Research, Food Distribution Research Society, vol. 24(1), pages 1-9, February.
    8. Michaël Freudenberg & Françoise Lemoine, 1999. "Central and Eastern European Countries in the International Division of Labour in Europe," Working Papers 1999-05, CEPII research center.
    9. J. Peter Neary, 2000. "Monopolistic Competition and International Trade Theory," Working Papers 200025, School of Economics, University College Dublin.
    10. Debaere, Peter, 2005. "Monopolistic competition and trade, revisited: testing the model without testing for gravity," Journal of International Economics, Elsevier, vol. 66(1), pages 249-266, May.
    11. Robert Kelm, 2016. "Eksport, import i kurs złotego: 2000−2014," Bank i Kredyt, Narodowy Bank Polski, vol. 47(6), pages 585-620.
    12. Yushi Yoshida & Nuno Carlos Leitão & Horácio Faustino, 2008. "Intra-Industry Trade between Japan and European Countries: a Closer Look at the Quality Gap in VIIT," Working Papers Department of Economics 2008/53, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    13. Don Clark & Denise Stanley, 2003. "Determinants Of Intraindustry Trade Between The United States And Industrial Nations," International Economic Journal, Taylor & Francis Journals, vol. 17(3), pages 1-17.
    14. Dutta, Sourish, 2022. "Measuring Horizontal and Vertical Differentiation in Intra-industry Trade," SocArXiv rudtq, Center for Open Science.
    15. Gordon H. Hanson & Chong Xiang, 2004. "The Home-Market Effect and Bilateral Trade Patterns," American Economic Review, American Economic Association, vol. 94(4), pages 1108-1129, September.
    16. Vogiatzoglou, Klimis, 2005. "Varieties or Qualities? Horizontal and Vertical Intra-industry Trade within the NAFTA Trade Bloc," Estey Centre Journal of International Law and Trade Policy, Estey Centre for Law and Economics in International Trade, vol. 6(2), pages 1-13.
    17. Masoud Nonejad, 2012. "Measuring Goods Quality in Iran’s Intra- Industry Trade with G-8 Member States," Journal of Economics and Behavioral Studies, AMH International, vol. 4(6), pages 344-353.
    18. Bel Hadj Tarek, 2012. "Product Differentiation and Intra-Industrial Trade: Quantitative Assessment in the Case of Tunisia," Journal of Economics and Behavioral Studies, AMH International, vol. 4(10), pages 570-587.
    19. Dutta, Sourish, 2023. "Endogenous Horizontal and Vertical Differentiation: Measuring Value Added in Intra-industry Trade," SocArXiv zqb9n, Center for Open Science.
    20. BELLINO, Antonella & CELI, Giuseppe, 2016. "The Migration-Trade Nexus in the Presence of Vertical and Horizontal Product Differentiation," CELPE Discussion Papers 137, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    21. Huiwen Lai & Susan Chun Zhu, 2004. "The determinants of bilateral trade," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 37(2), pages 459-483, May.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:inecre:v:54:y:2019:i:1:d:10.1007_s41775-019-00047-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.