Sectoral Level Analysis of India’s Bilateral Trade over 2001-2015

Aggarwal, Sakshi (2017): Sectoral Level Analysis of India’s Bilateral Trade over 2001-2015.

Abstract

The paper explores the sectoral level analysis of India’s IIT with rest of world (ROW), to try to identify the key determinants of IIT in the selected sectors for the Indian economy in the 21st century. It also examines the patterns and determinants of India’s intra-industry trade (IIT) in 7 major sectors during 2001-2015 in a panel data framework. The empirical results indicate that Vertical Intra-Industry Trade (VIIT) significantly explains India’s IIT pattern in Base Metals, Chemical, Machinery & Electrical Equipment, Textiles & Garments and Iron & Steel sectors. The analysis further shows that VIIT-type trade pattern is observed with lower income group countries whereas HIIT-type trade emerged with higher income group countries in case of Leather & Footwear and Vehicles and Transport Equipment sectors. The results also concludes that trade facilitation may significantly enhance IIT level with respect to India’s high income partners among all the sectors except Textiles & Garments and Iron & Steel segment; while it may also enhance IIT level with respect of lower income partners in Vehicles and Transport Equipment segment. Interestingly, the preferential trade dummy is found to be significant in limited sectors, implying less influence of the RTA partnerships on trade balance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Trade Policy, Intra-Industry Trade, LPI, Empirical Studies of Trade
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations; F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade

References

Acquino, A. (1978), ‘Intra-industry Trade and Inter-industry Specialisation as concurrent sources of International Trade in Manufactures’, Weltwirtschaftliches Archiv, 114(2): 275-96.

Algieri, B. (2005), “Trade Specialization Patterns: The Case for Russia”, Germany : Centre for Development Research, University of Bonn.

Andersen, M. A. (2003), ‘Empirical intra-industry trade: what we know and what we need to know’, Vancouver: Department of Geography, University of British Columbia.

Balassa, B. (1966), ‘Tariff reductions and trade in manufacturers among industrial countries’, American Economic Review, 56(3): 466-473.

Bano, S. (2014), “An Empirical Examination of Trade Relations between New Zealand and China in the Context of a Free Trade Agreement”, Working Paper in Economics 04/14, New Zealand: Department of Economics, University of Hamilton.

Bojnec, S. and Ferto, I. (2016), ‘Patterns and Drivers of the Agri-Food Intra-Industry Trade of European Union Countries’, International Food and Agribusiness Management Review, 19(2): 53-74.

Grubel, H. G. (1967), ‘Intra-industry Specialisation and the Pattern of Trade’, Canadian Journal of Economics and Political Science, 33(3): 374-88.

Grubel, H. G. and Lloyd, P. J. (1975), ‘Intra-industry Trade: The Theory and Measurement of International Trade in Differentiated Products’, London: The Macmillan Press Limited.

Kumar, S. and Ahmed, S. (2015), ‘Gravity Model by Panel Data Approach: An Empirical Application with Implications for South Asian Countries’, Foreign Trade Review,50 (4): 233-249.

Türkcan, K. (2011), ‘Vertical Intra-Industry Trade and Product Fragmentation in the Auto-Parts Industry’, Journal of Industry, Competition and Trade, 11(2): 149–186.