Vertical intra-industry trade in higher and lower quality: a new approach of measuring country-specific determinants

This paper aims to contribute empirically to the knowledge concerning the nature and causes of Italian vertical intra-industry trade (VIIT), distinguishing between high- and low-quality VIIT. The value-added of this study arises from the fact that it utilises a new approach to measure country-specific determinants, with the advantage that it eliminates the effects linked to the hypothesis of homogeneity between sectors within the same country. Therefore, differently from past studies on intra-industry trade, in this paper the characteristics of a particular country are measured by referring to information not only at aggregated level, but also at industry level. Our findings reveal that the determinants are not only same for the three dependent variables, but also depend on the technological intensity of goods. This confirms the particular nature of the Italian specialisation model, which is very different from that in other industrialised countries that tend to be located, at the higher end of the price-quality spectrum.