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

E.M. Ekanayake; Bala Veeramacheneni; Carlos Moslares

doi:10.4067/S0718-88702009000100002

Authors

E.M. Ekanayake Bethune-Cookman University
Bala Veeramacheneni State University of New York at Farmingdale
Carlos Moslares Facultat d´Economia IQS; Universitat Ramon Llull

DOI:

https://doi.org/10.4067/S0718-88702009000100002

Keywords:

Vertical and Horizontal Intra-Industry Trade, NAFTA

Abstract

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.

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