Vertical and Horizontal Intra-Industry Trade between the U.S. and NAFTA Partners

• Published in: Revista de análisis económico Vol. 24; no. 1; pp. 21 - 42
• Main Authors: Ekanayake, E. M, Veeramacheneni, Bala, Moslares, Carlos
• Format: Journal Article
• Language: Portuguese
• Published: ILADES. Universidad Alberto Hurtado 01.06.2009
• Subjects: ECONOMICS; Vertical and Horizontal Intra-Industry Trade; Comercio Intraindustrial Vertical y Horizontal; NAFTA
• ISSN: 0718-8870
• DOI: 10.4067/S0718-88702009000100002

The main objectives of this paper are to (a) explain the extent of vertical and horizontal intra-industry trade in the United State’s foreign trade with the North American Free Trade Area (NAFTA), and (b) identify the industryspecific determinants of vertical and horizontal intra-industry trade. One of the main findings is that the observed increase in intra-industry trade between the United States and NAFTA is almost entirely due to two-way trade in vertical differentiation. Another important finding is that the share of horizontal intra-industry trade has increased significantly during this period, although vertical intra-industry trade continued to be dominant in the U.S.-NAFTA IIT Trade. Among the industry-specific variables, product differentiation, vertical product differentiation, and product quality differences are found to have a positive effect on all three types of IIT shares. Industry concentration and industry size are found to have a negative and statistically significant effect on all three types of IIT share.