Intra-industry Trade between Brazil and OECD Countries: Decomposition and Its Main Determinants

Mauricio Vaz Lobo Bittencourt, Professor in the Department of Economics at Brazil's Federal University of Paraná (UFPR), will present on March 18th in Room 105 of the Agricultural Administration Building (2120 Fyffe Road) as part of the AEDE Applied Economics Seminar Series. His presentation will focus on his research: "Intra-industry Trade between Brazil and OECD Countries: Decomposition and Its Main Determinants."

Abstract: We examine intra-industry trade between Brazil and OECD countries for the period 2000-2009. Specifically, we decompose the intra-industry bilateral trade (IIT) and find its determinants. We find the USA and Mexico, respectively have the largest volume and IIT indices with Brazil. Additionally, we found vertical intra-industry trade (VIIT) to be larger than the horizontal intra-industry trade (HIIT). Further, Brazilian export goods are largely of lower quality than imports. Following the theoretical work of Falvey and Kierzkowski (1987), we specify and estimate a panel data econometric model to investigate the main determinants of VIIT. The empirical results show that endowment differences (in terms of capital/labor ratio) has a positive effect on vertical intra-industry bilateral trade, corroborating the central hypothesis of Falvey and Kierzkowski.

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