The quality and determinants of Brazil's intra-industry trade with OECD countries
DOI:
https://doi.org/10.1590/1980-53575216emcKeywords:
Intra-industry trade, Exports Quality, OECD Countries, Panel dataAbstract
Due to increasing intra-industry trade between countries, the quality of products exported by a country becomes crucial to developing trade and increasing foreign exchange, as higher quality products tend to attract more buyers and are sold at higher prices, contributing to economic growth. Thus, a comparative analysis of Brazilian exports is a good tool for obtaining evidence and ways for the country’s trade development. This article seeks to analyze the determinants and measure the quality of intra-industry trade (CII) between Brazil and the OECD countries, which accounted for about 40% of the destination of Brazilian exports in 2019. In order to measure this type of trade, most of the empirical studies use the Grubel-Lloyd-type methodology and, for its decomposition between horizontal (CIIH) and vertical (CIIV) CII, Greenaway, Hine and Milner (GHM) method is normally used. In addition to these methods, this study uses the Fontagné and Freudenberg (FF) method, which seems to minimize some of the limitations found in those methods. Using data from Trade Map - (International Trade Centre – ITC) for the years 2001 to 2016, which captures important shocks from the beginning of the period until the removal of President Dilma Roussef, this research found that there is vertical differentiation between the products exported and imported by Brazil to each one of the 35 member countries of the organization, in addition to investigating the determinants of CIIV following an econometric panel data model based on Falvey and Kierzkowski. The quality of products exported by Brazil was, on average, inferior to those imported by the country during the investigated period. This, as verified in this study, is explained by the difference between the countries’ resource endowments (Brazil and OECD countries). From a more disaggregated perspective, the study showed that Brazil stands out in some sectors compared to some specific countries. According to the results obtained, it appears that there is a need for trade and production policies aimed at improving the quality of Brazilian exports, in different sectors, in order to reduce the differences between the allocation of resources with countries with higher levels of income, thus providing better conditions for increasing national income through the export of better quality products.
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