advertisement

Intra Industry

63 %
38 %
advertisement
Information about Intra Industry

Published on October 10, 2008

Author: FNian

Source: slideshare.net

advertisement

Intra-Industry Trade

Definition Trade in which a country exports and imports in the same industry, in contrast to inter-industry trade. Example: Korea exports and imports cars.

Trade in which a country exports and imports in the same industry, in contrast to inter-industry trade.

Example: Korea exports and imports cars.

Measuring intra-industry trade Use the Grubel-Lloyd (GL) index to measure intra-industry trade International trade between The Philippines (RP) and Japan; 1998* SITC Exports from RP Imports into RP GL index 8 Miscellaneous manufactured articles 383,167 576,412 0.80 81 Prefabricated buildings 4,147 2,186 0.69 82 Furniture and parts thereof 42,332 6,155 0.25 83 Travel goods, handbags and similar containers 4,804 67 0.03 84 Articles of apparel and clothing accessories 115,627 3,255 0.05 85 Footwear 13,283 920 0.13 87 Prof. scientific & controlling instruments 24,091 175,018 0.24 88 Photographic apparatus 72,174 123,333 0.74 89 Miscellaneous manufactured articles 106,709 265,477 0.57

Use the Grubel-Lloyd (GL) index to measure intra-industry trade

GL index (or IIT index) X M X M X M IIT=1 IIT=0 IIT=0.33

GL index (or IIT index) The intra-industry trade index of home country with a country j for an industry i is: The intra-industry trade index of home country with a country j is: where

IIT index (or GL index) of selected countries   1988-91 1992-95 96-2000 High and increasing IIT Czech Republic n.a 66.3 77.4 Slovak Republic n.a 69.8 76 Mexico 62.5 74.4 73.4 Hungary 54.9 64.3 72.1 Germany 67.1 72 72 United States 63.5 65.3 68.5 Poland 56.4 61.7 62.6 Portugal 52.4 56.3 61.3 High and stable IIT France 75.9 77.6 77.5 Canada 73.5 74.7 76.2 Austria 71.8 74.3 74.2 UK 70.1 73.1 73.7 Switzerland 69.8 71.8 72 Belgium-Luxembourg 77.6 77.7 71.4 Spain 68.2 72.1 71.2 Netherlands 69.2 70 68.9 Sweden 64.2 64.6 66.6 Denmark 61.6 63.4 64.8 Italy 61.6 64 64.7 Ireland 58.6 57.2 54.6 Finland 53.8 53.2 53.9 Low and increasing IIT Korea 41.4 50.6 57.5 Japan 37.6 40.8 47.6 Low and stable IIT New Zealand 37.2 38.4 40.6 Turkey 36.7 36.2 40 Norway 40 37.5 37.1 Greece 42.8 39.5 36.9 Australia 28.6 29.8 29.8 Iceland 19 19.1 20.1

Measuring intra-industry trade Increasing importance of intra-industry trade

Increasing importance of intra-industry trade

Explaining intra-industry trade Supply side: economies of scale Demand side: love for variety

Supply side: economies of scale

Demand side: love for variety

Explaining intra-industry trade

An Alternative interpretation: intermediate goods

An Alternative interpretation: intermediate goods Internationalization of production

Japan’s Case

U.S.-Japan trade Japan and U.S. are important trading partners U.S. is Japan’s largest trade partner Japan is the third or fourth largest U.S. trading partner Japan has been running trade surplus U.S. has been running trade deficit

Japan and U.S. are important trading partners

U.S. is Japan’s largest trade partner

Japan is the third or fourth largest U.S. trading partner

Japan has been running trade surplus

U.S. has been running trade deficit

U.S. and Japan are important trading partners

Japan’s trade surplus and U.S. trade deficit

Pattern of inter-industry trade Comparative advantage determines the pattern of inter-industry trade Japanese pattern of inter-industry trade reflects the comparative advantage very well Japan’s exports skewed toward industries such as machinery and transportation machinery The imports skewed toward food, raw materials, and fuels

Comparative advantage determines the pattern of inter-industry trade

Japanese pattern of inter-industry trade reflects the comparative advantage very well

Japan’s exports skewed toward industries such as machinery and transportation machinery

The imports skewed toward food, raw materials, and fuels

Pattern of inter-industry trade: Japan and U.S.

Intra-industry trade Inter-industry trade is not the whole story of today’s international trade Country often exports and imports in the same industry Variety of preferences within a country (or preference for variety as the country) induces intra-industry trade

Inter-industry trade is not the whole story of today’s international trade

Country often exports and imports in the same industry

Variety of preferences within a country (or preference for variety as the country) induces intra-industry trade

Intra-industry trade index Source: C. Fred Bergsten, Takatoshi Ito, and Marcus Noland (2001). No More Bashing . Institute of International Economics, Table 4.2. 0.43 0.28 South Korea 0.59 0.59 United Kingdom 0.50 0.56 Germany 0.62 0.55 United States 0.36 0.26 Japan 1997 1990

Japan’s low intra-industry trade GL is very low for Japan. Why? Several possibilities Japan is closed for foreign goods Japan’s preferences are different (less variety?) Transportation costs make intra-industry trade more costly (but Japan’s m is lower than that for South Korea) Poor natural resources in Japan make Japan depend more on inter-industry trades (how about Korea?)

GL is very low for Japan. Why?

Several possibilities

Japan is closed for foreign goods

Japan’s preferences are different (less variety?)

Transportation costs make intra-industry trade more costly (but Japan’s m is lower than that for South Korea)

Poor natural resources in Japan make Japan depend more on inter-industry trades (how about Korea?)

Horizontal IIT vs. Vertical IIT

HIIT vs. VIIT HIIT: intra-industry trade in horizontally differentiated products (products differentiated by attributes) VIIT: intra-industry trade in vertically differentiated products (products differentiated by quality)

HIIT: intra-industry trade in horizontally differentiated products (products differentiated by attributes)

VIIT: intra-industry trade in vertically differentiated products (products differentiated by quality)

HIIT vs. VIIT or HIIT VIIT

Korea’s Case Source: 오근엽 , 주혜영 (2000) “ 한국의 수평적ㆍ수직적 산업내무역과 국가특성 : OECD 국가와의 무역을 중심으로” , 국제통상연구 제 5 권 제 1 호

Korea’s IIT index 18.11 10.30 Italy 21.11 14.52 France 16.49 10.07 Germany 25.17 16.19 UK 33.00 26.25 Japan 44.16 26.55 US 14.76 8.15 Belgium-L 14.59 7.88 Denmark 9.63 7.40 Netherlands 10.19 7.61 Canada 12.73 7.61 Swiss 13.70 7.84 Finland 1997 1994 대상국 4.70 4.74 Norway 5.18 5.28 Austria 3.57 4.32 Ireland 5.67 5.62 Australia 6.02 6.14 Spain 6.24 6.39 Sweden 2.73 2.04 N. Zealand 2.64 1.94 Mexico SITC 5 digit 0 0.41 Greece 0.43 0.69 Iceland 2.33 1.49 Portugal 1997 1994 대상국

Korea’s HIIT & VIIT index 10.1 1.4 6.5 0.9 89.8 13.0 93.4 13.5 14.5 France 10.3 1.6 6.4 1.0 89.6 14.5 93.5 15.1 16.1 UK 14.9 3.9 9.3 2.4 85.0 22.3 90.6 23.7 26.2 Japan 12.1 3.2 7.5 1.9 87.8 23.3 92.7 24.5 26.5 US share in IIT share in total share in IIT share in total share in IIT share in total share in IIT share in total a=25% a=15% a=25% a=15% HIIT VIIT Total IIT

Determinants of IIT Difference of capital intensity Proxy: difference in GDP per capita Size of the economy of both countries Difference of the size of the economy distance

Difference of capital intensity

Proxy: difference in GDP per capita

Size of the economy of both countries

Difference of the size of the economy

distance

Empirical results - + + + VIIT (a=25%) - - + - HIIT (a=25%) -0.0576 (-3.32) -0.0041 (-0.06) -0.0118 (-0.50) DIST 0.98 92 -0.5980 (-3.52) 0.0006 (9.35) 0.2904 (1.12) -3.9673 (-12.29) 0.923 92 0.917 92 R 2 N 0.5841 (3.42) 0.4298 (2.59) DGDP 0.0002 (3.13) 0.0030 (4.27) SGDP 0.0578 (0.21) 0.0064 (0.22) DPCI -2.9074 (-7.19) -2.6022 (-6.44) Constant IIT

Export Similarity Index

ESI measures the competition between the country a and the country b in the country c. X i (ac) is the share of the product i in the exports of the country a to country c. X i (bc) is the share of the product i in the exports of the country b to country c. Export Similarity Index (ESI)

ESI measures the competition between the country a and the country b in the country c.

X i (ac) is the share of the product i in the exports of the country a to country c.

X i (bc) is the share of the product i in the exports of the country b to country c.

Export Similarity Index (ESI) ESI = 1 ESI = 0 0 0 0 0 0 0 6 3 4 2 B A 0 0 10 0 20 0 0 3 0 2 B A 5 4 3 2 1 Prod 5 4 3 2 1 Prod

The effect of weak yen

The effect of weak yen A weak Yen can affect the segments of Asia’s exports that compete directly with Japan in third markets. Japanese exporters would benefit from a weak Yen as they would be able to price their products cheaper in US$ terms, and this would reduce the demand for other Asian countries exports. However, the impact would not be uniform across the Asian economies. Korea and Taiwan, which have trade structures highly similar to Japan and as such compete more with the latter in the same markets, will suffer more from a weak Yen. In 2000, close to two-thirds of all products exported by the NIEs were in the same category as Japan. ASEAN economies such as Indonesia and the Philippines, as well as China, whose exports do not directly compete with Japanese manufacturers, are not expected to suffer much from a weak Yen.

A weak Yen can affect the segments of Asia’s exports that compete directly with Japan in third markets. Japanese exporters would benefit from a weak Yen as they would be able to price their products cheaper in US$ terms, and this would reduce the demand for other Asian countries exports.

However, the impact would not be uniform across the Asian economies. Korea and Taiwan, which have trade structures highly similar to Japan and as such compete more with the latter in the same markets, will suffer more from a weak Yen.

In 2000, close to two-thirds of all products exported by the NIEs were in the same category as Japan. ASEAN economies such as Indonesia and the Philippines, as well as China, whose exports do not directly compete with Japanese manufacturers, are not expected to suffer much from a weak Yen.

ESI between China and Korea

Export Similarity between intra-regional exports and extra-regional exports Source: estimated from UN COMTRADE dataset 53.5 40.1 49.6 50.2 56.8 32.7 21.1 37.4 49.1 39.4 Par - 51.2 49.6 49.8 52.6 47.2 46.3 52.1 56.3 38.3 Chile 36.4 36.1 35.1 34.8 38.6 40.3 39.0 39.0 40.0 45.0 Brazil 32.3 33.0 33.3 30.5 34.5 34.0 35.2 39.5 38.0 - Arg 1999 1998 1997 1996 1995 1994 1993 1992 1991 1990 ESI between intra- & extra-regional exports: Mercosur

Structural Change Index

SCI measures the extent to which industries are growing at different rates, which results in compositional shifts – that is, structural change. S i,t is the share of output (or employment) of the industry i at period t. Structural Change Index (SCI)

SCI measures the extent to which industries are growing at different rates, which results in compositional shifts – that is, structural change.

S i,t is the share of output (or employment) of the industry i at period t.

Structural Change Index (SCI) SCI = 0 SCI = 1 0 0 0 0 0 0 6 3 4 2 t1 t0 0 0 10 0 20 0 0 3 0 2 t1 t0 5 4 3 2 1 Prod 5 4 3 2 1 Prod

Structural Change Index (SCI) SCIs do not measure changes in the overall level of activity or employment — the index would be zero if all industries were growing (or declining) at the same rate. Any changes in the output or employment shares of the different industries used to compile the SCIs reflect the ‘net’ impact of the many influences on the composition of output and employment — some of which pull in different directions. For example, increases in demand for some of the products of a particular industry group may be offset by reductions or slower rates of demand growth for other products of the same industry group.

SCIs do not measure changes in the overall level of activity or employment — the index would be zero if all industries were growing (or declining) at the same rate.

Any changes in the output or employment shares of the different industries used to compile the SCIs reflect the ‘net’ impact of the many influences on the composition of output and employment — some of which pull in different directions.

For example, increases in demand for some of the products of a particular industry group may be offset by reductions or slower rates of demand growth for other products of the same industry group.

 

Add a comment

Related pages

Intraindustrieller Handel – Wikipedia

Weist ein Land innerhalb derselben Industrie sowohl Importe als auch Exporte auf, spricht man vom intraindustriellen Handel (engl.: intra industry trade, IIT).
Read more

Intra Industry - Global Retail Solutions

Intra Industry is a mega assortment wholesale & retail product supplier based in Shenzhen China that offers a one-stop-shop concept for importers and ...
Read more

Intra - Home - Intra Industry

We hope to be of your assistance and would be pleased to answer any initial questions that you might have! Please contact us for more information or ...
Read more

Intra-industry trade - Wikipedia, the free encyclopedia

Intra-industry trade refers to the exchange of similar products belonging to the same industry. The term is usually applied to international trade, where ...
Read more

World Economy Intra-industry trade

World Economy Intra-industry trade Princeton University Press 3 index, is simple to calculate and intuitively appealing. Once a country’s export and
Read more

Intra-industry trade: A Heckscher-Ohlin-Ricardo approach

ELSEVIER Journal of International Economics 39 (1995) 201-226 Intra-industry trade: A Heckscher-Ohlin-Ricardo approach Donald R. Davis
Read more

Intra-Industry Trade eBook by Cameron Thies ...

Lesen Sie Intra-Industry Trade Cooperation and Conflict in the Global Political Economy von Cameron Thies mit Kobo. Intra-Industry Trade calls for us to ...
Read more

Intra–industry | Definition of Intra–industry by Merriam ...

Seen and Heard. What made you want to look up intra–industry? Please tell us where you read or heard it (including the quote, if possible).
Read more

Intra-industry trade and regional integration - Munich ...

The link between regional integration and intra-industry trade (IIT) has been under scrutiny since it has been first suggested by the European integration ...
Read more