Intra-industry trade - An analysis of measurements

Abstract: In the last decades intra-industry trade (IIT) got a lot of attention in economic research. In 1975 Grubel & Lloyd presented a way of measuring IIT, this method is used even today. Later researchers found out that IIT can be disentangled into vertical and horizontal IIT. To calculate vertical and horizontal IIT unit-values are used. In this paper I want to test different ways of measuring, IIT, vertical and horizontal IIT. Different aggregational levels of data are used, as well as an alternative to the unit-value approach, which I call the quality-defined index. The data set is classified according to the Harmonised system (HS) and covers the passenger car sector. The passenger car sector is used in this paper based on the fact that the data available is very good. To test the different measures correlation coefficients and coefficients of variation are used. The aggregational level affects the result of the calculations, especially when measuring vertical IIT. Still the measures are significantly positively correlated. When defining quality as done in the quality-defined measure, instead of using unit-values, there are large differences between this measure and the measure based on disaggregated data.