Determinants of Intra-Industry Trade

The Case for United States-Canadian Trade, 1967-1982

Janice G. Yee

• Publisher: Routledge
• Year: 2021
• ISBN:
  9781000526127
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

While most international economists will note that trade is beneficial, they will also comment on the adjustment costs that are usually incurred when factors of production, most notably labor, are redistributed between industries. A goal for many policymakers is to make that adjustment process easier and smoother for the factors involved, thereby highlighting the benefits of trade, rather than the costs of trade. But what are these industries that experience smoother adjustment costs? There is a growing constituency which believes that intra-industry or like trade is a characteristic of an industry with low adjustment costs. First published in 1997, this book hopes to address some of these issues and add to the growing discussion on the topic of intra-industry trade, with special attention placed on the relationship between the U.S. and Canada.

V

Empirical Observations and Results

DOI: 10.4324/9781003249191-5

The analysis now turns to the estimation of the statistical model. As noted in the previous chapter, the construction of the data set was subject to two different procedures thus providing an opportunity to perform statistical analysis on two data sets. Each set bears the name of its originator(Caves and Bowen), and it is expected that the differences in concordance implementation will not have a large effect on the outcome of the statistical analyses.¹

In analyzing the dependent variable, IIT, it was noted that the (unweighted) average share of IITs for the industries within the sample had increased over the course of time (see Table 5.1 A). In 1967, the first year of the study period, the average share of IIT amounted to 37% of gross trade between the U.S. and Canada. By 1982, the amount of IIT had increased to approximately 51% of the gross trade. A closer look at the average² IIT levels for (SITC) industries revealed no clear apparent pattern as to the types of industries which had also seen an increase in IIT (see Tables 5.1B and 5.1C).

Table 5.1 Average IIT 1967–82 (All Industries)

Year	Avg. IIT
1967	.37
1968	.41
1969	.42
1970	.45
1971	.45
1972	.44
1973	.45
1974	.43
1975	.43
1976	.42
1977	.44
1978	.47
1979	.50
1980	.50
1981	.51
1982	.51

...

Table 5.1B Industry Average IIT 1967–82

SITC	Commodity Description	Avg. IIT
032	Fish, etc., tinned prepared	.74
111	Non-alcoholic beverages	.77
112	Alcoholic beverages	.07
242	Wood (rough)	.76
243	Wood (shaped)	.17
251	Pulp, waste paper	.08
266	Synthetic, regenerated fiber	.25
332	Petroleum prods.	.54
512	Organic chem.	.64
513	Inorganic elements, oxides, etc.	.78
514	Other inorganic chem.	.77
521	Coal, petroleum, etc., chem.	.55
531	Synth, dyes, natl. indigo, lakes	.08
533	Pigments, paints, etc	.16
541	Medicinal, etc., prods.	.18
551	Essential oil, perfume, etc.	.12
553	Perfume, cosmetics, etc.	.26
554	Soaps, cleaning, etc., preps	.27
561	Fertilizers, manufactured	.19
571	Explosives, pyrotech prods.	.64
581	Plastic materials	.22
599	Chemicals nes	.25
611	Leather	.54
612	Leather, etc., manufactures	.57
621	Materials of Rubber	.28
629	Rubber articles nes	.69
631	Veneers, plywood, etc.	.58
632	Wood manufactures nes	.48
641	Paper, paperboard	.19
642	Articles of paper, etc.	.47
651	Textile, yam, thread	.19
652	Cotton fabrics, woven	.09
653	Woven textiles noncotton	.16
654	Lace, ribbons, tulle, etc	.24
655	Special textile, etc., prods.	.43
656	Textile, etc., products nes	.17
657	Floor coverings, tapestry, etc.	.26
661	Cement, etc., building prods.	.43
662	Clay, refractory building prods	.37
663	Other nonmetal mineral mfs.	.52
664	Glass	.58
665	Glassware	.28
666	Pottery	.21
671	Pig Iron, etc.	.58

Table of contents

• Cover Page
• Series Page
• Title Page
• Copyright Page
• Dedication Page
• Contents Page
• Illustrations Page
• Preface Page
• I. Introduction
• II. A Brief History of U.S.—Canadian Trade Relations
• III. The Evolution of Intra-Industry Trade
• IV. The Statistical Model
• V. Empirical Observations and Results
• VI. Conclusions
• Appendix A: Description of Concordance and Variables
• Appendix B: Description of Standard Industrial Classification (SIC)
• Bibliography
• Index