The Determinants of China-Japan-Korea’s Vertical Intra Industry Trade to ASEAN4 countries

Select Language: Indonesia

Fithra Faisal Hastiadi

East Asia has been witnessing an increased trade in parts and components over the last decade. This fact has increased the importance of Intra Industry Trade (IIT) within the region. To differentiate the types of IIT, this paper employs two types of threshold. The first one follows the work of Abdel-Rahman (1991), Greenaway, Hine, and Milner (1994), and Fontagné, Freudenberg, and Péridy (1997), which mainly use a 15% threshold, the second one is based from the work of Fukao (2003) that employs 25% threshold. Should we know to which degree ASEAN-4’s exports are dispersed, we could easily extract the proper policy to cope with any economic shocks. Thus said, since ChinaJapan-Korea (CJK)’s Vertical IIT to ASEAN4 is a very important variable to provide cushions of any possible shocks therefore, it is very crucial to figure out the factors that determine the CJK’s Vertical IIT in South East Asia. Employing static panel data models, this paper concludes that logistic performance and the difference in wage or income are major determinants for the CJK’s Vertical IIT trend in ASEAN4 countries.
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