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Journal of Applied Mathematics
Volume 2012, Article ID 857824, 12 pages
http://dx.doi.org/10.1155/2012/857824
Research Article

GMM Estimator: An Application to Intraindustry Trade

Polytechnic Institute of Santarém and CEFAGE, Évora University, Complexo Andaluz Apt. 295, 2001-904 Santarém, Portugal

Received 16 December 2011; Revised 3 February 2012; Accepted 3 February 2012

Academic Editor: Shuyu Sun

Copyright © 2012 Nuno Carlos Leitão. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Abstract

This paper investigates the determinants of intraindustry trade (IIT), horizontal IIT (HIIT), and Vertical IIT (VIIT) in the automobile industry in Portugal. The trade in this sector between Portugal and the European Union (EU-27) was examined, between 1995 and 2008, using a dynamic panel data. We apply the GMM system to solve the problems of serial correlation and the endogeneity of some explanatory variables. The findings are consistent with the literature. The difference between per capita incomes and factor endowments present a positive sign. These results are according to Heckscher-Ohlin predictions. The economic dimension has a positive impact on trade. A negative effect of the distance on bilateral trade was expected and the results confirm this, underlining the importance of neighbour partnerships for all trade.