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Endowment Differences and the Composition of Intra‐Industry Trade
Author(s) -
Cabral Manuel,
Falvey Rod,
Milner Chris
Publication year - 2013
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/roie.12044
Subject(s) - endowment , economics , intra industry trade , endowment effect , empirical evidence , international economics , international trade , trade barrier , microeconomics , philosophy , epistemology
The empirical relationship between differences in endowments and different types of trade is investigated in this paper. Although net trade ( NT ) and vertical intra‐industry trade ( IIT ) are both broadly viewed as reflecting endowment differences, we suggest that there will be systematic differences in the way their shares of trade adjust as endowment differences become larger. Empirical evidence for E uropean U nion trade with its 52 major trading partners confirms this. The share of horizontal IIT (net trade) decreases (increases) for all increases in absolute endowment differences, but the share of vertical IIT can both increase and decrease with increases in endowment differences.