Vertical Specialization and Intra-industry Trade: the Role of Factor Endowments

In this paper, we rely on vertical differentiation models (Falvey-Kierzkowski type) to study the effects of differences in factor endowments on vertical intra-industry specialization. These effects can vary depending on the relative position of each country in terms of both its specialization in high or low qualities and its technological (dis)advantage. We focus on the Spanish intra-industry trade with the main OECD countries. This allows us to consider the case of an intermediate country, as Spain basically exports low-quality varieties to the Northern countries of the OECD and high-quality varieties to the Southern ones. In order to achieve more general results, we consider different types of productive factors: physical, human and technological capital.