Vertical specialization and intra-industry trade:: The role of factor endowments

Vertical Specialization and Intra-Industry Trade: The Role of Factor Endowments. - In this paper, we use vertical differentiation models of the Falvey-Kierz-kowski type to study the effects of differences in factor endowments on vertical intra-industry specialization. We focus on Spanish intra-industry trade, as Spain typically 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. Our results confirm that factor endowments play a significant role in explaining vertical intra-industry specialization.