Hyun-Hoon Lee

Determinants of intra-industry trade: A longitudinal, cross-country analysis

Determinants of Intra-Industry Trade: A Longitudinal, Cross-Country Analysis. — This study examines the determinants of intra-industry trade (IIT using longitudinal data for 68 countries for 1970–1987. The analysis distinguishes between manufacturing and nonmanufacturing countries and compares traditional static estimates with dynamic ones. This approach permits distinctions between equilibrium and disequilibrium structures and, similarly, between historical and current sources of IIT. The results are generally supportive of IIT hypotheses, but there are important differences between manufacturing and nonmanufacturing countries and between the static and dynamic structures. Moreover, the extent of IIT appears to be dominated more by preference than by scale differentials, at least among manufacturing countries.ZusammenfassungBestimmungsgründe des intraindustriellen Handels. Eine Zeitreihenuntersuchung im Länderquerschnitt. — Die Verfasser untersuchen die Bestimmungsgründe des intraindustriellen Handels (IIH und benutzen dabei Zeitreihendaten für 68 Länder in der Zeit von 1970 bis 1987. Die Untersuchung unterscheidet zwischen Industrieländern und Nicht-Industrieländern und vergleicht traditionelle statische Schätzungen mit dynamischen. Dieses Vorgehen ermöglicht es, zwischen Gleichgewichts und Ungleichgewichtsstrukturen und — in ähnlicher Weise — zwischen historischen und gegenwärtigen Bestimmungsgründen des IIH zu unterscheiden. Die Ergebnisse stützen generell die IIH-Hypothesen, aber es gibt erhebliche Unterschiede zwischen Industrie- und Nicht-Industrieländern und zwischen statischen und dynamischen Strukturen. Außerdem scheint der Umfang des IIH mehr durch Unterschiede in den Präferenzen als durch Unterschiede in den Skalenerträgen bestimmt zu sein, zumindest im Handel zwischen Industrieländern.

Intra-industry trade in manufactures: The case of Korea

Intra-Industry Trade in Manufactures: The Case of Korea. - This paper provides an empirical analysis of intra-industry trade (IIT) in Koreas foreign trade. First, we measure the share of IIT in Koreas trade of manufactures from 1977 to 1986. The share of IIT increased from 0.350 in 1977 to 0.502 in 1985, but declined to 0.421 in 1986. Second, we test hypotheses regarding country characteristics of IIT. Using the unadjusted Grubel-Lloyd index with a trade imbalance variable in the regression equations, we show that the extent of IIT is: (1) negatively correlated with differences in per capita incomes and with “economic distances” between Korea and its trading partners, and (2) positively correlated with the trade intensity between Korea and its trading partners and with the existence of a common cultural background.ZusammenfassungIntraindustrieller Handel mit gewerblichen Erzeugnissen am Beispiel von Korea. - Dieser Aufsatz liefert eine empirische Analyse des intraindustriellen Handels (IIH) für den koreanischen Auβenhandel. Erstens wird der Anteil des IIH an Koreas Handel mit Industriegütern zwischen 1977 und 1986 betrachtet: Er stieg von 1977 bis 1985 von 0.350 auf 0.502, fiel aber 1986 auf 0.421. Zweitens werden Hypothesen zu den länderspezifischen Merkmalen des IIH getestet, wobei der unkorrigierte Grubel-Lloyd-Index mit einer Variablen für Handelsungleichgewichte in den Regressionsgleichungen benutzt wird. Es zeigt sich, daβ das Ausmaβ des IIH negativ korreliert ist mit den Unterschieden im Pro-Kopf-Einkommen und der “ökonomischen Entfernung” zwischen Korea und seinen Handelspartnern, dagegen positiv mit der Handelsintensität sowie mit der Existenz eines gemeinsamen kulturellen Hintergrundes.

Frontiers of research in intra-industry trade

List of Tables List of Figures Acknowledgements Notes on the Contributors Introduction P.J.Lloyd & H.H.Lee PART I: DEVELOPMENT OF INTRA-INDUSTRY THEORY AND MEASUREMENT Controversies Concerning Intra-Industry Trade P.J.Lloyd PART II: MODELS OF INTRA-INDUSTRY TRADE Horizontal Intra-Industry Trade and the Growth of International Trade N.Schmitt & Z.Yu Intra-Industry Trade in Homogeneous Products D.M.Bernhofen Fragmentation and Intra-Industry Trade R.W.Jones, H.Kierzkowski & G.Leonard The Geography of Intra-Industry Trade M.Amiti & A.J.Venables PART III: EMPIRICAL STUDIES AND POLICY ISSUES OF INTRA-INDUSTRY TRADE Marginal Intra-Industry Trade: Towards a Measure of Non-Disruptive Trade Expansion M.Brulhart Long-term Trends in Intra-Industry Trade L.Fontagne & M.Freudenberg Intra-Industry Trade in Services H.H.Lee & P.J.Lloyd Intra-Industry Trade and the C-H-O model: Evidence and Labour Market Adjustments D.Greenaway & C.Milner PART III: INTRA-INDUSTRY TRADE, AFFILIATE PRODUCTION AND FDI A Unified Approach to Intra-Industry Trade and Direct Foreign Investment J.R.Markusen & K.E.Maskus Factor Endowments and Intra-Industry Affiliate Production by Multinational Enterprises K.Ekholm Globalization and Intra-Firm Trade: Further Evidence K.Fukasaku & F.Kimura Intra-Industry Trade in Assets H.Grubel Index

Intra-Industry Trade in Services

Hitherto, all empirical studies and analyses of intra-industry trade have been confined to trade in goods. The only discussion of intra-industry trade in a service industry, to our knowledge, are those of the transportation services by Kierzkowski (1989) and the international telephone industry by Tang (1999). Yet, for the purpose of analysis of trade flows and their effects on the allocation of resources and the welfare of national residents, there is no reason to separate trade in goods from trade in services. In principle, intra-industry trade should cover both goods and services. In practice, the two trade flows have been separated because the Standard International Trade Classification (SITC) applies only to goods and there has been no readily comparable classification of trade in services.

Financial Integration in East Asia: An Empirical Investigation

The central objective of this paper is to empirically evaluate the degree of linkages among East Asian equity and bond markets. Using data from the IMF’s Coordinated Portfolio Investment Survey (CPIS), we find that intra‐East Asian financial asset holdings of four East Asian countries – Japan, Korea, Hong Kong and Singapore – are larger than the levels predicted by the financial gravity model. However, our analysis suggests that this result is likely to be driven by intra‐regional trade linkages and reflect those linkages. Therefore, the salient implication for regional policymakers is that they should continue to promote intra‐regional financial integration. This paper also aims to analyse the impact of three different types of country‐specific risks – political, economic and financial risks – on investment from the four countries. This analysis yields a clear positive relationship between destination‐country risk, in particular political risk, and capital inflows.

The relative impact of the US and Japanese business cycles on the Australian economy

Abstract The purpose of this paper is to assess the relative impact of the US and Japanese business cycles on the Australian economy. Our vector autoregression (VAR) models include real gross domestic products (GDPs) of three countries and world average oil price, which are quarterly covering the period 1959:3–1996:4. In order to take account of a possible structural change, estimates are also made separately for the fixed exchange rate and flexible exchange rate periods. The rolling regression technique is utilised to trace the patterns and extents of changing importance between the US and Japan’s impacts on the Australian economy. We find that over the entire sample period, the business cycles of both the US and Japan have the significant impacts on movements in Australian GDP. Under the recent flexible exchange rates, however, the impact of US output becomes greater, while the Japanese impact becomes smaller and negative. It also appears that US output has significant impacts in both short and longer term, while Japanese output has little impact in the short term, but greater impact in the longer term.

The Role of Home and Host Country Characteristics in FDI: Firm-Level Evidence from Japan, Korea and Taiwan

Abstract There is a large and growing empirical literature that investigates the determinants of outward foreign direct investment (FDI). This literature examines primarily the effect of host country characteristics on FDI even though home country characteristics also influence the decision of firms to invest abroad. In this paper, we examine the role of both host and home country characteristics in FDI. To do so, we constructed a firm-level database of outward FDI from Japan, Korea and Taiwan. Our empirical analysis yields two main findings. First, host countries with better environment for FDI, in terms of larger market size, smaller fixed entry costs and lower wages, attract more foreign investors. Second, firms from home countries with higher wages are more likely to invest abroad. An interesting and significant policy implication of our empirical evidence is that policy-makers seeking to promote FDI inflows should prioritize countries with higher wages.

Do Developing-country WTO Members Receive More Aid for Trade (AfT)?

Since the World Trade Organization (WTO) Doha Development Agenda (DDA) negotiations started in 2001, the importance of aid for trade (AfT) has been well recognised as a useful tool for facilitating trade, economic growth and social development in developing countries. At the WTO Hong Kong Ministerial Conference in December 2005, the ‘AfT initiative’ was launched and many high‐income member countries pledged to increase their AfT contributions, particularly for the least developed member countries (LDC). This paper aims to assess whether and to what extent the WTOs developing member countries have received more AfT. For this purpose, a system generalised method of moments is applied to a sample of 118 recipient countries for the period 2001–10. We find evidence that while LDC WTO members on average receive relatively more AfT than other developing countries, the difference has not increased since launch of the AfT initiative. Among the three categories of AfT, the positive WTO membership effect for LDC members increased for building productive capacity and for trade policy and regulation, but declined for infrastructure.

Asymmetric Output Cost of Lowering Inflation: Empirical Evidence for Canada

A strand of theoretical and empirical evidence in the literature suggests non-linearity in the output-inflation relationship, viz. a non-linear Phillips curve. We develop a VAR model of output, inflation, and terms of trade augmented with logistic smooth transition autoregression specifications. Empirically, the model captures non-linear features present in the data. Output costs of reducing inflation vary, depending on the economy, size of inflation change, and whether policy makers seek to disinflate or prevent inflation from rising. Thus, inferences based on the conventional linear Phillips curve may provide misleading signals about the cost of lowering inflation and the appropriate policy stance.

Determinants on utilization of the Korea–ASEAN free trade agreement: margin effect, scale effect, and ROO effect

In this paper we empirically examine the determinants on utilization of the Korea–ASEAN Free Trade Agreement (KAFTA) by employing a database provided by the Korea Customs and Trade Development Institute. We find that, although three effects, namely preferential margin (margin effect), rules of origin restrictiveness (ROO effect), and average export volume (scale effect), contribute to determining the utilization of the FTA, the scale effect has the greatest impact. Our results suggest that, since firms with relatively small volumes of trade are usually small and medium-size enterprises (SMEs), policy assistance for reducing administrative costs should be geared toward SMEs. Our results further indicate that policymakers should also try to negotiate more extensive tariff reductions on products not only where MFN rates are high but also where shipments are large.