Measuring vertical and horizontal intra-industry trade: the case for Turkey

Measuring horizontal intra-industry trade and vertical intra-industry trade (VIIT) requires that traded products be classified as horizontally differentiated and vertically differentiated, and Greenaway et al. (1994) do this by using the relative unit values of exports and imports. We used the five-digit SITC, Rev. 3 trade data for the Turkish manufacturing sector, for 1987–2001. We found that: 1) vertical industries dominated horizontal industries and low quality vertical industries dominated high quality vertical industries; 2) in terms of the decomposition of the nationally aggregated Grubel–Lloyd (GL) indexes, the VIIT component constituted a significant part of this index all through the period; 3) when the GL index was decomposed at the three-digit level for the years 1989, 1992, 1995, 1998 and 2001 and only for those sectors with GL indexes greater than 0.5, it was found that the number of such industries increased steadily overtime and vertical industries dominated throughout the period.