engleski

The Pattern of the intra-industry trade between Croatia and the European Union

The traditional trade theory of factor endowments could not explain why countries import and export similar products, so new theoretical approaches set out on the basis of the empirical evidence during the 1960s. Economic theory teaches us that different relative factor prices and endowment will lead to the increasing trade between industries (inter-industry trade) amongt countries but empirical work in the mid-1960s showed the incremental of intra-industry trade (IIT). New economic theory predicts that the volume of IIT is a function of the similarity and the level of gross domestic product of countries, and of a distance. There are two types of intra-industry trade, horizontal (the exchange of similar products) and vertical (the exchange of inputs in the case of more processed outputs or exchange of quality different products) determined by different factors. Economic studies show a relatively high level of IIT with the EU for all CEECs, countries, its increasing trend in recent years and vertical IIT accounts for 80 to 90 percents of total IIT. In this paper, the trade pattern of Croatia and the intra-industry trade between Croatia and the EU will be analyzed. The aim of this paper is to estimate the intra-industry pattern between Croatia and the EU as well as to make the evaluation of the whole Croatian intra-industry trade and to test the determinants of these calculated levels empirically. Unadjusted Grubel - Lloyd index is used to calculate the IIT level in the paper and it shows that overall IIT is quite low for Croatia and the share of vertical IIT is nearly 90 per cent, but in some years almost higher. This paper is structured as follows: section 1 introduction, section 2 gives the brief review of the Theory of comparative advantage and the main conclusion of the New trade theory as well as the review of the economic literature on intra-industry trade and how to measure the intra-industry trade, while section 3 presents the implementation of theoretical knowledge onto statistical trade data and investigates the trade pattern between Croatia and the EU. Section 4 discusses the determinants of intra-industry trade for Croatia and there will be presented the results of regression analysis. Section 5 concludes the paper

integration process; intra-industry trade; horizontal and vertical IIT; determinants of IIT; Croatia

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