Horizontal and vertical intra-industry trade in Australian manufacturing: does trade liberalization have any impact?

This paper contributes to the literature on intra-industry trade (IIT) by disentangling such trade into horizontally and vertically differentiated products, and investigating their determinants in the context of trade liberalization in Australia. IIT in Australian manufacturing has increased following trade liberalization in 1980s and is increasingly dominated by vertically differentiated products. Industry level evidence confirms that the failure to segregate IIT into horizontally and vertically differentiated products produces misleading results as their determinants differ. Also, structural changes brought about by the policy liberalization appear to have an impact on total as well vertical IIT.