Intra−industry trade with emergent countries: what can we learn from Spanish data?

Abstract

In this paper, we study the nature of Spanish intra−industry trade and find that intra−industry trade with CEEC, Asian and Mediterranean countries has increased considerably since the middle of the Nineties. The second aim of the paper is to study if the comparative advantage argument also explains the vertical intra−industry trade between different income countries. According to OLS estimations, technological differences increase DVIIT while physical capital differences lead to its decrease. The results obtained applying the Heckman method support the idea that differences in physical capital reduce the probability of IIT to occur but the level of vertical and horizontal IIT is more accurately explained by the proximity of partners, similarity in development level and size of market than by the differences in physical capital endowments. The variables considered, mostly country−specific, do have the same impact on vertical and horizontal IIT with emergent countries.