Robert C. Hine

Vertical and Horizontal Intra-Industry Trade : A Cross Industry Analysis for the United Kingdom

A large theoretical literature has emerged directed at explaining the presence of intra-industry trade (IIT). One of the distinctions which comes out of these models is that between horizontal IIT (where goods are differentiated by attributes) and vertical IIT (where goods are differentiated by quality). In this paper horizontal and vertical IIT in U.K. trade are disentangled using a unit value dispersion criterion and a range of industry characteristics. The paper not only points up the relative importance of vertical and horizontal IIT in the United Kingdom, it also demonstrates how a failure to separate them out can impact on the interpretation of empirical results. Copyright 1995 by Royal Economic Society.

Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK

Country-Specific Factors and the Pattern of Horizontal and Vertical Intra-Industry Trade in the UK. - A large number of empirical studies have investigated the relationship between country-specific factors and total intra-industry trade (IIT). One important shortcoming of this literature is that it ignores the distinction between horizontal and vertical IIT and ignores the fact that they may have different determinants. This paper disaggregates UK IIT into its horizontal and vertical components and, using bilateral trade data, estimates a series of models incorporating countryspecific variables. The results suggest that vertical IIT is more important in the UK than horizontal IIT and that the inter-country pattern of vertical IIT is systematically related to a range of explanatory variables.ZusammenfassungLänderspezifische Faktoren und das Muster des horizontalen und vertikalen intraindustriellen Handels des Vereinigten Königreichs. - In einer großen Zahl empirischer Studien wurde die Beziehung zwischen länderspezifischen Faktoren und dem gesamten intraindustriellen Handel (IIH) untersucht. Ein bedeutender Mangel dieser Studien ist, daß sie die Unterscheidung zwischen horizontalem und vertikalem IIH ebenso vernachlässigen wie die Tatsache, daß diese unterschiedliche Bestimmungsgründe haben können. Die Autoren zerlegen den britischen IIH in seine horizontalen und vertikalen Komponenten und schätzen unter Verwendung bilateraler Handelsdaten eine Reihe von Modellen, die länderspezifische Variable enthalten. Die Ergebnisse deuten darauf hin, daß der vertikale IIH für das Vereinigte Königreich wichtiger ist als der horizontale und daß das länderbezogene Muster des vertikalen IIH systematisch mit einer Reihe von erklärenden Variablen verbunden ist.

International outsourcing and the skill structure of labour demand in the United Kingdom

This paper investigates empirically the link between international outsourcing and the skill structure of labour demand in the United Kingdom. It is the first detailed study of this issue for the UK. Outsourcing is calculated using import-use matrices of input-output tables for manufacturing industries for the period 1982 to 1996. Estimating a system of variable factor demands, our main results show that international outsourcing has had a strong negative impact on the demand for unskilled labour. Hence, international outsourcing is an important component in explanations of the changing skill structure of manufacturing industries in the United Kingdom.

An empirical assessment of the impact of trade on employment in the United Kingdom

Abstract A large number of studies have recently attempted to evaluate the impact of trade on employment, many relying on either the factor content or growth accounting approaches. With some notable exceptions, this work finds limited evidence of strong direct effects but stronger effects through induced productivity changes. This study models the effects of trade on employment in the UK in a dynamic labour demand framework, on a panel of 167 manufacturing industries. We find that when we introduce trade, increases in trade volumes, both in terms of imports and exports, cause reductions in the level of derived labour demand. When we disaggregate by origin of imports we find stronger effects in trade with the EU and US compared to trade with East Asia. This provides supportive evidence for the idea that trade affects x-inefficiency, with the strongest competition for UK manufacturers coming from producers in the EU and US.

Adjustment and the measurement of marginal intra-industry trade

ConclusionsIn this paper, we have set out to do two things: first to investigate the properties of the index of MIIT recently proposed by Hamilton and Kniest; second to evaluate how useful the index is as an input to relating IIT and adjustment. In investigating the former, we found that there were a number of problematic properties of the H-K index. Most notably it censors the data in a non-random way by excluding important information; it inflates the measured MIIT by using nominal rather than real data; and it is unsealed. These properties not only bias the measure upward, they make it inappropriate from the standpoint of evaluating adjustment problems. Our discussion concludes with several suggestions as to how we might identify and measure MIIT more effectively from the standpoint of evaluating the adjustment implications of trade expansion.

Trade with Low Wage Economies, Employment and Productivity in UK Manufacturing

The pattern of UK employment has been significantly transformed over the last two decades, strengthening the services base of the economy but in the process imposing significant adjustment pressures on many groups in the labour force. The manufacturing sector has experienced large scale job losses: of the 7.26 million jobs in the sector in 1979, some 2.8 million, or 40%, had disappeared by 1992. The impact on some regions and groups of workers has been severe unskilled workers especially found it difficult to obtain re-employment, and their relative earnings have declined. During this period unemployment levels increased rapidly, peaking at 3.1 million in 1983 but remaining at over 2 million for much of the subsequent period. These developments have been driven by a number of factors, both national and internationial. Technological advance and institutional change have certainly been major factors. A key concern, addressed in this paper, has also been the role played by the rapid growth of import competition from low wage economies. To the extent that low-wage competition shifts UK consumption from domestically-manufactured to imported goods, jobs in UK manufacturing will be lost. Whilst this should eventually lead to a redeployment and more productive use of UK labour, it generates at least transitional unemployment. Moreover, the displacement effect will have knock-on, multiplier effects on upstream industries that supply intermediate products, and on business services which are used by the import-competing industry (Greenhalgh 1994). Employment in import competing sectors could further be affected as UK firms seek to defend their market position by improving X-efficiency and speeding up technological innovation. The consequent productivity gains, while making jobs more secure in the longer term, might generate additional job losses in the short-term by enabling firms to maintain output with fewer workers. The adjustment costs associated with these changes will depend on the flexibility of labour markets. Of course, adjustment and change are normal features of a modern market economy and there are offsetting general equilibrium effects. But there could still be concern that the scale and speed of rising competition from developing countries imposes excessive short-term adjustment costs on owners of resources in UK manufacturing, or at least that this might provoke a protectionist backlash thatjeopardises progress towards a more open UK economy.

Further evidence on the effect of foreign competition on industry level wages

ConclusionsThis paper has examined the impact of trade changes on industry level wage outcomes in a bargaining framework. The results suggest that on average increases in trade, whether emanating from imports or exports, serve to decrease wage changes. This evidence is consistent with the view that foreign trade acts to moderate demand for an industry’s output and hence to discipline wage setting and is consistent with what Konings and Vandenbussche (1995) reported for UK manufacturing.

Vertical and Horizontal Intra-Industry Trade: An Analysis of Country-and Industry-Specific Determinants

As discussed in Chapter 2 of this book, much theoretical effort has been expended in explaining the circumstances in which intra-industry trade (IIT) will arise. Besides a range of country-specific determinants this work has shown that scale economies, product differentiation and imperfect competition are typically important. Although the empirical work also confirms that IIT levels vary with market, production and product characteristics across industries, the results show a degree of inconsistency across studies.

Tests for Factor Homogeneity and Industry Classification.

ConclusionsAs we saw at the outset, the issue of whether statistical classifications of industries map on to groups of activities that can be aggregated together in an economically meaningful way is an important one. It is especially important in the context of IIT analysis, not only for its implications for measuring IIT but also from the standpoint of assessing its adjustment implications.

Market Size and Economic Integration When Labor Markets are Unionized

The paper explores the effects of economic integration on trade, wages, and welfare when market sizes differ. A duopoly model with two-way intraindustry trade in similar products and with unionized labor markets is employed. It is confirmed that, for a wide range of different relative market sizes, integration leads to higher wages, employment, and welfare. However, where market sizes differ widely, the reduction of trade barriers leads to a reduction of wages, employment, and-in some circumstances-welfare in the country with the large market. Copyright Blackwell Publishing Ltd 2003.