Description

This paper presents the evolution of Chilean intra-industry trade (IIT) from 1985 to 1996, and estimates it’s degree of horizontal and vertical differentiation. Additionally, using measures of intra-industry trade we estimate the participation of low adjustment cost trade in the growth of total trade. Finally, we estimate the effects of bilateral trade agreements on IIT for the sample of countries considered. The results allow us to conclude that IIT has increased until the early 90s, and has sustained a participation of approximately 20% during the present decade. The highest levels of IIT have been achieved with geographical neighbours. This seems to support the policy followed by the government, since liberalisation programs have been primarily oriented to neighbouring countries. Chilean IIT can be characterised as vertical, which means that IIT with the rest of the world is mainly of manufactures of different qualities that are classified as the same. After correcting IIT to measure the participation of non-disruptive IIT, we can observe that 82% of the growth of trade has been inter-industrial, and that it has generated more adjustment costs than the remaining 18% that was intra-industrial.