There is a belief that trade liberalization within the European Community (EC) has led to greater intraindustry, rather than interindustry trade which in turn is thought to have facilitated adjustment within member countries. Verification of these hypotheses is central to making inferences about the likely trends in the EC. This requires the quantification of indices representing intraindustry trade and intraindustry specialization, adjustment indicators and the identification of the liberalized and nonliberalized sectors in the various EC member countries.
VIIT occurs where a country exchanges higher quality for lower quality products of the same industry. Quality differences are observed where all consumers agree on the ranking of products when they are offered at the same prices. A number of measures of product quality rely on the price of individual, very disaggregated products as reflecting quality. Unit values are easy to compute but are open to differing interpretations since they are the result of 2 factors, prices and product mixes. Using index numbers the product mix element can be separately identified and used to measure product quality. VIIT can be explained by higher order software (HOS) analysis alternative approaches involve demand factors in influencing the quality of national production, and the persistence through time of an initial quality advantage.
Research is being carried out in order to assess the importance of VIIT in the context of concern over the possible adjustment problems related to trade and specialization in the single market. A simple technique has been presented to identify the industries where VIIT is important and to quantify the extent of VIIT. This technique measures the relative unit values of imports and exports in trade which is matched at the 5 digit level. This analysis can be combined with information on the crude relative unit values of total exports and imports by industry, thus identifying industries where VIIT takes the form of a product mix effect rather than a pure price effect.
Funding SchemeCSC - Cost-sharing contracts
3000 DR Rotterdam
105 59 Athenes - Athina -Tavros
2000 Anvers /Antwerpen