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Portuguese Intra-Industry Trade: A Dynamic Panel Data Analysis

Author

Listed:
  • Horácio C. Faustino
  • Nuno C. Leitão

Abstract

This paper provides empirical evidence of the determinants of intraindustry trade (IIT), horizontal IIT and vertical IIT between Portugal and six European trading partners, using a dynamic panel data analysis. The paper introduces the distinction between the short-run and the long-run effects of the industry characteristics on IIT. The relationship between IIT and comparative advantages is also tested. The estimation results suggest that Portugal has comparative advantages in low-quality varieties and support Davis’ (1995) hypothesis that decreasing costs are not necessary for IIT. The findings of the paper also provide an answer to Torstenson’s (1996) question, namely that it is primarily human capital, rather than physical capital, that determines the quality of differentiated products.

Suggested Citation

  • Horácio C. Faustino & Nuno C. Leitão, 2006. "Portuguese Intra-Industry Trade: A Dynamic Panel Data Analysis," Working Papers Department of Economics 2006/21, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    • Handle: RePEc:ise:isegwp:wp212006
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    References listed on IDEAS

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    More about this item

    Keywords

    Intra-industry trade; dynamic panel data; Portugal;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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