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Horizontal and Vertical Intra-industry Trade

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  • Dutta, Sourish

Abstract

From the beginning of the 1980s, the first theoretical analysis of intra-industry trade showed that the determinants and consequences of this type of trade are different, depending on whether the traded products differ in quality. When the products are subject to intra-industry trade between two countries with distinct quality, this trade is vertically differentiated. Otherwise, it is called horizontal differentiation. There is a method for distinguishing intra-industry trade between two countries in vertical differentiation from those in horizontal differentiation. This method compares the unit value of exports to that of imports for each industry's intra-industry trade. It considers the intra-industry trading carried out in this industry as vertical differentiation when the unit value of exports differs significantly from that of imports.

Suggested Citation

  • Dutta, Sourish, 2022. "Horizontal and Vertical Intra-industry Trade," MPRA Paper 113268, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:113268
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    References listed on IDEAS

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    1. Stiglitz, Joseph E, 1987. "The Causes and Consequences of the Dependence of Quality on Price," Journal of Economic Literature, American Economic Association, vol. 25(1), pages 1-48, March.
    2. David Greenaway & Robert Hine & Chris Milner, 1994. "Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 130(1), pages 77-100, March.
    3. Lionel Fontagné & Michaël Freudenberg, 1997. "Intra-Industry Trade: Methodological Issues Reconsidered," Working Papers 1997-01, CEPII research center.
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    More about this item

    Keywords

    Intra-Industry Trade; Horizontal Differentiation; Vertical Differentiation;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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