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Driving forces of vertical intra-industry trade in Europe 1996–2005

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Abstract

A common feature in the empirical literature of intra-industry trade is the analysis of trade between a given reference country and a set of partners. This article differs from previous studies by examining the bilateral trade among all trading partners within a set of partners. Using a panel data approach, we find that differences in factor endowments seem not to be important as a driving force behind vertical intra-industry trade for European countries over the chosen period. More important driving forces are production size, geographical proximity, average income per capita and income distribution overlap.

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Notes

  1. See e.g. Greenaway et al. (1995), Aturupane et al. (1999), Durkin and Krygier (2000), Gullstrand (2002a, b), Mora (2002) and Crespo and Fontoura (2004), Jensen and Lüthje (2008).

  2. Linder (1961), Falvey and Kierzkowski (1987), Stokey (1991), Copeland and Kotwal (1996) and Murphy and Shleifer (1997).

  3. Falvey (1981), Falvey and Kierzkowski (1987), Flam and Helpman (1987), Stokey (1991), Davis (1995), Copeland and Kotwal (1996) and Murphy and Shleifer (1997).

  4. More precisely, Mora (2002) investigates high-quality VIIT.

  5. See Coe and Helpman (1995). Alternative measures of technological capital were also calculated assuming δ to be 5 and 10% with similar results (Coe and Helpman 1995: pp 883–886). Mora (2002) assumes 15% too.

  6. See Benhabib and Spiegel (1994). Depreciation rates of 4 and 10% give very similar results (Benhabib and Spiegel 1994: p 167). Mora (2002) and Crespo and Fontoura (2004) assume 7% too.

  7. In the case of Germany, we use Frankfurt am Main.

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Acknowledgments

We acknowledge helpful suggestions and comments by the anonymous reviewer.

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Authors and Affiliations

  1. Department of Entrepreneurship and Relationship Management, University of Southern Denmark, Odense, Denmark

    Lars Jensen & Teit Lüthje

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  1. Lars Jensen
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  2. Teit Lüthje
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Correspondence to Teit Lüthje.

Appendix

Appendix

See Tables 5 and 6.

Table 5 Manufactured goods at a 2-digit product level
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Table 6 Descriptive measures of explanatory variables
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Jensen, L., Lüthje, T. Driving forces of vertical intra-industry trade in Europe 1996–2005. Rev World Econ 145, 469–488 (2009). https://doi.org/10.1007/s10290-009-0022-5

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