Intra-tourism trade, income distribution and tourism endowment: an econometric investigation

Hanna, Joseph and Lévi, Loïc and Petit, Sylvain (2015): Intra-tourism trade, income distribution and tourism endowment: an econometric investigation. Published in: Applied Economics , Vol. 47, No. 21 (January 2015): pp. 2184-2200.

Abstract

Empirical investigation (Nowak et al., 2012) points out that vertical intra-industry trade (VIIT) in Europe is the dominant type of intra-industry trade (IIT) in the tourism sector. This article is the first in tourism literature to test separately the determinants of vertically and horizontally differentiated services, using the most recent models in the theory of IIT. We examine bilateral trade among all trading partners of the sample of European countries, covering the period from 2000 to 2008. We show that differences in gross domestic product per capita and the income-distribution overlap, as well as cultural proximity, are the most significant driving forces behind VIIT for European countries. Geographic distance has a negative effect, whereas specific tourism endowments and relative size of the economies are less conclusive. These results confirm theory predictions and most of the empirical findings related to the pattern of VIIT for the manufacturing sector. As expected, we find that determinants of VIIT cannot explain horizontal intra-industry trade in tourism. We suggest two alternative methods of estimation: generalized least squares logistic function and the fractional logit estimator. We conclude that there are common factors explaining IIT in the manufacturing and tourism trades.

• Item Type: MPRA Paper
• Language: English
• Keywords: intra-tourism trade, income distribution overlap, bilateral tourism flows, vertical differentiation, fractional-logit
• Subjects: C - Mathematical and Quantitative Methods > C3 - Multiple or Simultaneous Equation Models ; Multiple Variables > C31 - Cross-Sectional Models ; Spatial Models ; Treatment Effect Models ; Quantile Regressions ; Social Interaction Models; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade; L - Industrial Organization > L8 - Industry Studies: Services > L83 - Sports ; Gambling ; Restaurants ; Recreation ; Tourism

References

Abd-el-Rahman, K. S. (1986). Réexamen de la définition et de la mesure des échanges croisés de produits similaires entre les nations, Revue Economique, 37, 89–116.

Abd-el-Rahman, K. S. (1991). Firms’ competitive and national comparative advantages as joint determinants of trade composition, Weltwirtschaftliches Archiv/ Review of World Economics, Vol.127, p83–97

Aturupane, C., Djankov, S. and Hoekman, B. (1999). Horizontal and vertical intra-industry trade between Eastern Europe and the European union, Weltwirtschaftliches Archiv, Vol.135, p62–81.

Azhar K. M. and Elliott, R. J. R. (2006). On the measurement of product quality in intra-industry trade, Review of World Economics, Vol.142, p476–95.

Balassa, B. and Bauwens, L. (1987). Intra-industry specialisation in a multi-country and multi-industry framework, The Economic Journal, Vol.97, p923–39.

Balassa, B. A. (1966). Tariff reductions and trade in manufactures among industrial countries, American Economics Review, Vol.56, p466–73.

Blanes, V. and Martín, C. (2000). The nature and causes of intra-industry trade: back to the comparative advantage explanation? the case of Spain, Review of World Economics/Weltwirtschaftliches Archiv, Vol.136, p423–41.

Cabral, M., Falvey, R. and Milner, C. (2013). Endowment differences and the composition of intra-industry trade, Review of International Economics, Vol.21, p401–18.

Crespo, N. and Fontoura, M. P. (2004). Intra-industry trade by types: what can we learn from Portuguese data?, Weltwirtschaftliches Archiv, Vol.140, p52–79.

Disdier, A.-C., Tai, S. H. T., Fontagné, L. (2010). Bilateral trade of cultural goods, Review of World Economics, Vol.145, p575–95.

Durkin, J. T. and Krygier, M. (1997). Empirical analysis of intra-industry trade: a vertically differentiated approach, in Revised version of paper presented at Empirical Issues in International Trade Conference, Purdue University, West Lafayette, IN, November 1995.

Durkin Jr., J. T. and Krygier, M. (2000) Differences in GDP per capita and the share of intraindustry trade: the role of vertically differentiated trade, Review of International Economics, Vol.8, p760–74.

Eicker, F. (1963) Asymptotic normality and consistency of the least squares estimators for families of linear regressions, The Annals of Mathematical Statistics, Vol.34, p447–56.

Falvey, R. and Kierzkowski, H. (1987). Product quality IIT and (Im)perfect competition, Protection and competition in International Trade, Blackwell, Oxford.

Felbermayr, G. J. and Toubal, F. (2010). Cultural proximity and trade, European Economic Review, Vol.54, p279–93.

Finger, J.-M. (1967). Trade overlap and the theory of international specialisation: a statistical study of the Hecksher Ohlin and Linder Theories as alternative hypotheses, University of North Carolina.

Flam, H. and Helpman, E. (1987). Vertical product differentiation and north-south trade, American Economic Review, Vol.77, p810-840.

Fontagné, L. and Freudenberg, M. (1997). IIT: methodological issues reconsidered, Working Papers in Economics No. 97-01, CEPII, Paris.

Fontagné, L., Freudenberg, M. and Peridy, N. (1997). Trade patterns inside the single market, Working Papers in Economics No. 1997-01, CEPII, Paris.

Fukao, K., Ishido, H. and Ito, K. (2003). Vertical intra-industry trade and foreign direct investment in East Asia, Journal of the Japanese and International Economies, Vol.17, p468–506.

Gabrisch, H. (2006) Vertical IIT between EU and accessions countries, IWH-Discussion Papers, No. 12-06, Institut für Wirtschaftsforschung Halle, Halle.

Greenaway, D., Hine, R. C. and Milner, C. R. (1994). Country-specific factors and the pattern of horizontal and vertical intra-industry trade in the UK, Weltwirtschaftliches Archiv/Review of World Economics, Vol.130, p77–100.

Greenaway, D., Hine, R. C. and Milner, C. R. (1995). Vertical and horizontal intra-industry trade: a cross industry analysis for the United Kingdom, The Economic Journal, Vol.105, p1505–18.

Grubel, H. G. and Lloyd, P. J. (1975). IIT: The Theory and Measurement of International Trade in Differentiated Products, Macmillan Press, London.

Helpman, E. (1981). International trade in the presence of product differentiation, economies of scale and monopolistic competition: a Chamberlin-Heckscher-Ohlin approach, Journal of International Economics, Vol.11, p305–40.

Helpman, E. and Krugman, P. R. (1985). Market Structure and Foreign Trade, MIT Press, Cambridge, MA.

Hummels, D. and Levinsohn, J. (1995). Monopolistic competition and international trade: reconsidering the evidence, The Quarterly Journal of Economics, Vol.110, p799–836.

Jensen, L. and Lüthje, T. (2009). Driving forces of vertical intra-industry trade in Europe 1996–2005, Weltwirtschaftliches Archiv, Vol.145, p469–88.

Krugman, P. R. (1979). Increasing returns, monopolistic competition, and international trade, Journal of International Economics, Vol.9, p469–79.

Krugman, P. R. (1980). Scale economies, product differentiation, and the pattern of trade, American Economic Review, Vol.70, p950–960.

Krugman, P. R. (1981). Intra-industry specialization and the gains from trade, Journal of Political Economy, Vol.89, p959–73.

Lancaster, K. (1980). Intra-industry trade under perfect monopolistic competition, Journal of International Economics, Vol.10, p151–75.

Lee, H. H. and Lloyd, P. J. (2002). IIT in Services, Macmillan Press, London.

Lejour, A., Verheijden, J. W. and De, P. (2004). Services trade within Canada and the European union; what do they have in common?, CPB Discussion Paper, No. 42, CPB Netherlands Bureau for Economic Policy Analysis, The Hague.

Li, D., Moshirian, F. and Sim, A.-B. (2003). The determinants of intra-industry trade in insurance services, Journal of Risk & Insurance, Vol.70, p269–87.

Linder, S. B. (1961). An Essay on Trade and Transformation, John Wiley and Sons, New-York.

Loertscher, R. and Wolter, F. (1980). Determinants of intra-industry trade: among countries and across industries, Weltwirtschaftliches Archiv, Vol.116, p280–93.

Martín-Montaner, J. A. and Ríos, V. O. (2002). Vertical specialization and intra-industry trade: the role of factor endowments, Weltwirtschaftliches Archiv/Review of World Economics, Vol.138, p340–65.

Michaely, M. (1962). Concentration in International Trade, North-Holland, Amsterdam.

Nowak, -J.-J., Petit, S. and Sahli, M. (2012). Intra-tourism trade in Europe, Tourism Economics, Vol.18, p1287–311.

Organization for Economic Co-operation and Development (2002). OECD Statistics on International Trade of Services, OECD Publications, Paris.

Organization for Economic Co-operation and Development (2008). OECD Statistics on International Trade of Services, OECD Publications, Paris.

Papke, L. E. and Wooldridge, J. M. (1996). Econometric methods for fractional response variables with an application to 401(k) plan participation rates, Journal of Applied Econometrics, Vol.11, p619–32.

Tang, L. (2003). The determinants of international telephone traffic imbalances, Information Economics and Policy, Vol.15, p127–45.

United Nations and World Tourism Organization (2012). Tourism Statistics, UNWTO Publications, Madrid.

Verdoorn, P. J. (1960). The Intra-Bloc Trade of Benelux, Economics Consequences of the Size of Nations, Macmillan Press, London, pp. 291–329.

Webster, A., Fletcher, J., Hardwick, P. et al. (2007). Tourism and empirical applications of international trade theory: a multi-country analysis, Tourism Economics, Vol.13, p657–74.

White, H. (1980). A heteroskedasticity-consistent covariance matrix estimator and a direct test for heteroskedasticity, Econometrica, Vol.48, p817–38.