Specialisation Across Varieties Within Products and North-South Competition
CEPII Working Paper 2007-06
53 Pages Posted: 17 Sep 2007 Last revised: 11 Jan 2014
Date Written: May 2007
Recent works in trade theory and related empirical studies have drawn a revised picture of trade patterns: international specialisation has been proved to take place within products, across varieties, rather than across products or across industries. Systematising this repeated empirical evidence, we ask here what are the precise patterns regarding the specialisation of countries within products and across varieties and what are the determinants of such specialisation.
Our value added is twofold. Firstly, we use BACI, the new CEPII data base of world trade covering the largest available set of countries over a decade at the most detailed level of the product classification. BACI reconciles the declarations of trading partners to the United Nations (COMTRADE), extracting trade costs from unit values of imports, and correcting for the quality of the declarations. We consider varieties of products inside each heading of the 6-digit level of the harmonised nomenclature, which comprises some 5,000 products. Secondly, we take advantage of this extensive coverage to systematically address the determinants of specialisation using a 10 year panel of 163 countries and 25 manufactured sectors.
Our results point to four stylised facts. Firstly, the similarity of exports between North and South is much more limited when we consider differentiated varieties than when industries are considered. Secondly, the unit value of exported products to a certain market varies with the level of development of the exporter. Thirdly, the observed redistribution of market shares has been especially detrimental to advanced economies for low unit value varieties, while the EU has better resisted competition in high unit value varieties. Fourthly, we use a gravity equation to explain the bilateral trade in varieties among developing and developed economies.
On the basis of such detailed and systematic empirical evidence regarding the specialisation of countries within - rather than between - products, we ask whether the fears raised by North-South competition are exaggerated.
Keywords: Product Trade, Export Unit Values, Vertical Differentiation
JEL Classification: F1, F4
Suggested Citation: Suggested Citation