Disentangling Horizontal and Vertical Intra industry Trade: Case of Pakistan

Résumé

This study systematically examines and decomposes Intra Industry trade (IIT) of Pakistan into horizontal Intra industry trade (HIIT), low-quality vertical Intra industry trade (LQVIIT), and high-quality vertical Intra industry trade HQVIIT components using unit value indices. The study also investigates decade wise IIT of Pakistan using GL indices, and the country-specific determinants of Pakistan’s IIT at the 1-digit industry level of SITC. Decomposition and measurement of Pakistan’s IIT show that in the last forty-three years HIIT dominates VIIT, while LQVIIT dominates HQVIIT industries. The empirical analysis of the last decade shows that LQVIIT dominates HIIT as well as HQVIIT, and in the last three decades HIIT, LQVIIT, and HQVIIT show constant, increasing, and decreasing trend, respectively. The empirical analysis of the last two decades shows that IIT of Pakistan is sharply increasing, IIT of Pakistan with major developing trading partners is more than with major developed trading partners. Distance and differences in human capital variables show an insignificant impact on IIT of Pakistan.