Country-specific determinants of vertical and horizontal intra-industry trade: an empirical analysis of South Africa

  • Nasser Al-Mawali

    Student thesis: Doctoral Thesis


    The principal purpose of this study is to provide a refined empirical investigation concerning country-specific determinants of horizontal and vertical intra-industry trade (IIT,) in relation to South Africa using the gravity model of trade in a panel data setting. Prior to investigating the case of South Africa's intra-industry trade a critical review of the relevant theoretical, methodological, and empirical literature is provided. The study operationalises the theoretical distinction between horizontal and vertical IIT using the latest methodology of decomposing total IIT into horizontal intra-industry trade (HIIq and vertical intra-industry trade (WIT). This study makes several advances on earlier empirical studies of intra-industry trade determinants. These include the introduction of new county-specific determinants of intra-industry trade that previous studies have not examined. Furthermore, it is the first empirical study that traces the relationship between intra-industry trade flows and intellectual property rights (IPRs). Moreover, to ensure the sensitivity and robustness of the results, several econometric approaches have been used in estimating the gravity model of South Africa's intra-industry trade: the consistent coefficient approach, the fixed effects approach, the random effects approach, and the between effects approach. The econometric results are generally satisfactory in terms of economic interpretation and statistical significance and thus offer new empirical validation to the theoretical explanatory variables. The key findings suggest the following: the volume of South Africa's IIT has increased during the study period and its WIT exceeds its HIIT. The latter result reflects the nature of South Africa's trade as it imports high valued added products and exports primary and mineral products. South Africa's intra-industry trade and its two components are positively related to market size and standard of living, and negatively related to geographical distance. Furthermore, separately, the IPRs and the imitation ability of South Africa's trading partners are not important factors in determining IIT flows; however, the interaction between them is an important factor. This study also reveals South Africa should pursue its intra-industry trade with rest of world concentrating on local industries that produce most competitive varieties, absorbing labor and other resources from the production of other varieties.
    Date of Award2006
    Original languageEnglish
    SupervisorPhil Lewis (Supervisor) & Craig Applegate (Supervisor)

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