Bilateral Vertical Intra-Industry Trade in Manufactured Goods among the EU15 Countries in the Period from 1990 to 1998

A common feature in the empirical literature of intra-industry trade is analysis of trade between a given reference country and a set of partners. This design does not permit generalization of empirical results to other reference countries and sets of partners, since the results may depend on characteristics of the studied reference country and set of partners. Accordingly, this article examines the bilateral trade among all trading partners within a set of partners. Such an analysis has not yet been conducted in the international literature. We conduct an econometric analysis of EU15 intra-industry trade with vertically differentiated products to investigate the effect of differences in factor endowments. This question has drawn great attention in recent international literature. Moreover, this paper examines the effect of economic size, income distribution overlap and geographical proximity.