Intra-industry trade index

The intra industry trade index of country i with country j for product k is measured as follows:

𝐼𝑛𝑡𝑟𝑎 − 𝑖𝑛𝑑𝑢𝑠𝑡𝑟𝑦 𝑖𝑛𝑑𝑒𝑥𝑖𝑗𝑘 =𝑚𝑖𝑛 𝑖𝑚𝑝𝑜𝑟𝑡𝑖𝑗𝑘 , 𝑒𝑥𝑝𝑜𝑟𝑡𝑖𝑗𝑘12

𝑖𝑚𝑝𝑜𝑟𝑡𝑖𝑗𝑘 + 𝑒𝑥𝑝𝑜𝑟𝑡𝑖𝑗𝑘

• If the index is = 0 no intra-industry trade is recorded

• If the index is = 1 import flow is almost equal to export flow

Horizontal and verticaldifferentiationTwo goods are differentiated good if they are substitutes butnot perfect substitutes.

1. Horizontal: Goods are different for certain characteristicsbut at the same price some consumers will buy one andsome will buy other, it really depends on theirpreferences. Example: Pepsi and Coca Cola.

2. Vertical: Goods are different and all consumers wouldprefer one to the other if they were sold at the sameprice. Goods are qualitatively different, so the choice alsodepends on consumer purchasing power. Example:restaurant and fast-food.

Quality Comparition – Unit ValueTo compare good’s characteristic across countries, we assume that quality can beinferred from cross country price differences

• We introduce the definition of Unit Value (UV) as follows

𝑈𝑉 =𝑇𝑟𝑎𝑑𝑒 𝑓𝑙𝑜𝑤 𝑣𝑎𝑙𝑢𝑒 𝑖𝑛 𝐸𝑢𝑟𝑜𝑠

𝑇𝑟𝑎𝑑𝑒 𝑓𝑙𝑜𝑤 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑖𝑛100 𝑘𝑔

• Trade flow indicates both an import (𝑈𝑉𝑖𝑚𝑝) and an export (𝑈𝑉𝑒𝑥𝑝) flow of a product group

When UV differs across countries we can state that traded goods quality differs.Specifically:

• Goods are similar when 0,75< 𝑈𝑉𝑖𝑚𝑝

𝑈𝑉𝑒𝑥𝑝< 1,25

• Country ’s imports have a higher quality𝑈𝑉𝑖𝑚𝑝

𝑈𝑉𝑒𝑥𝑝≥ 1,25

• Country’s exports have a higher quality𝑈𝑉𝑖𝑚𝑝

𝑈𝑉𝑒𝑥𝑝≤ 0,75

• Sometimes proposed thresholds are 1,15 and 0,85

DataGoods (http://ec.europa.eu/eurostat/web/international-trade-in-goods/data/database)

• Link to Eurostat data: International trade in goods

• Click on ‘International trade in goods - Detailed data’

• Click on ‘EU trade since 1988 by SITC’ (Data Explorer)• Reporter: EU28 (European Union 28)• Partner: China, Russian Federation, United States• Product(5 digit SITC code): 26130, 26340, 65221, 71211• Period: jan-dec 2016• Indicators: Value in Euros and quantity (100 kg)

Services (http://ec.europa.eu/eurostat/web/international-trade-in-services/data/database)

• Link to Eurostat data: International trade in services

• Click on ‘International trade in services (since 2010) (BPM6) (bop_its6_det)• Geo: EU28• Partner: China (except Hong Kong), Russia, United States• Services (BMP6): SJ321, SJ34, SJ35• Period: 2015• Stk_Flow: Credit, Debit• Currency: Million Euros

Intra-industry trade index, extra EU28 trade

CHINA USA RUSSIA

ID Product group (2016)

26130 RAW SILK (NOT THROWN) 0.00 0.94 N. D.

26340 COTTON, CARDED OR COMBED 0.48 0.11 0.08

65221WOVEN FABRICS CONTAINING 85% OR

MORE BY WEIGHT OF COTTON,... 0.09 0.46 0.86

71211

STEAM TURBINES AND OTHER VAPOUR

TURBINES AND PARTS FOR MARINE

PROPULSIONN. D. 0.87 N.D.

ID Services group (2015)

SJ321 Waste treatment and de-pollution 0.19 0.59 0.12

SJ34 Trade-related services 0.83 0.56 0.39

SJ35 Other business services n.i.e. 0.86 0.98 0.60

Source: Our elaboration on Eurostat data (International trade in goods database; International trade in services database)

Quality comparison in 2016, extra EU28 trade in goods

EU28 export unit value

ID Product group CHINA USA RUSSIA

26130 RAW SILK (NOT THROWN) N.D. N.D. N.D.

26340 COTTON, CARDED OR COMBED 1,055.42 141.45 146.644

65221WOVEN FABRICS CONTAINING 85% OR

MORE BY WEIGHT OF COTTON,... 7,639.47 926.93 3,222.93

71211

STEAM TURBINES AND OTHER VAPOUR

TURBINES AND PARTS FOR MARINE

PROPULSIONN.D. 59,597.66 2,000

EU28 import unit value

26130 RAW SILK (NOT THROWN) 4,733.04 4,340.00 N.D.

26340 COTTON, CARDED OR COMBED295.80

253.55 262.33

65221WOVEN FABRICS CONTAINING 85% OR

MORE BY WEIGHT OF COTTON,... 557.71 2,890.13 175.31

71211

STEAM TURBINES AND OTHER VAPOUR

TURBINES AND PARTS FOR MARINE

PROPULSION2,226.33 17,358.63 N.D.

Source: Our elaboration on Eurostat data (International trade in goods database)

Quality comparison in 2016, extra EU28 trade in goods(continue)

Ratio import unit value/export unit value

ID Product group CHINA USA RUSSIA

26130 RAW SILK (NOT THROWN) N.D. N.D N.D.

26340 COTTON, CARDED OR COMBED 0.280 1.792 1.789

65221WOVEN FABRICS CONTAINING 85% OR

MORE BY WEIGHT OF COTTON,... 0.073 3.118 0.054

71211

STEAM TURBINES AND OTHER VAPOUR

TURBINES AND PARTS FOR MARINE

PROPULSIONN.D. 0.291 N.D.

Source: Our elaboration on Eurostat data (International trade in goods database)