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Quality Differentiation, Vertical Disintegration and The Labour Market Effects of Intra-Industry Trade

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  • Giuseppe Celi

    (CELPE University of Salerno, Università di Bari)

Abstract

The work offers a new treatment of the labour market effects of international trade building on recent developments in the literature on intra-industry trade (IIT) stressing the importance of vertical IIT. The central idea is that heterogeneity of traded goods plays a crucial role both in terms of quality differentiation and vertical fragmentation of production. The basic concepts are presented in the introductory chapter. The second chapter presents an econometric study which shows that the role of factor intensity in IIT requires that different forms of IIT are properly distinguished. In the third chapter the evaluation of the impact of trade on labour markets is studied in a model in which IIT is explained on Heckscher-Ohlin principles. Applying the model to trade between Italy and less advanced countries and inferring the factor content of intra-industry trade from the inter-sectoral relationship between factor intensity and average unit values of exports, I find that the labour market effects f intra-industry trade add significantly to the estimated factor market impact of trade. Finally, fourth chapter is a study of Outward Processing Trade flows between the EU and Central Eastern European countries: results suggest that the labour market effects of intra-industry trade flows deriving from the vertical disintegration of production are significant.

Suggested Citation

  • Giuseppe Celi, 2004. "Quality Differentiation, Vertical Disintegration and The Labour Market Effects of Intra-Industry Trade," CELPE Discussion Papers 86, CELPE - CEnter for Labor and Political Economics, University of Salerno, Italy.
    • Handle: RePEc:sal:celpdp:86
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    References listed on IDEAS

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    1. Kamal Abd-el-Rahman, 1991. "Firms’ competitive and national comparative advantages as joint determinants of trade composition," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 127(1), pages 83-97, March.
    2. Fontagné, Lionel & Freudenberg, Michael & Péridy, Nicolas, 1998. "Intra-Industry Trade and the Single Market: Quality Matters," CEPR Discussion Papers 1959, C.E.P.R. Discussion Papers.
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    1. Celi, Giuseppe, 2010. "Empirical Explanation of Vertical and Horizontal Intra-industry Trade in the UK: A Comment - Spiegazioni empiriche del commercio intra-industriale verticale ed orizzontale del Regno Unito: un commento," Economia Internazionale / International Economics, Camera di Commercio Industria Artigianato Agricoltura di Genova, vol. 63(1), pages 53-90.

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