QUALITY MATTERS. ITALY’S INTRA-INDUSTRYTRADE WITH EASTERN EUROPEOVER THE YEARS 1988-’95

This paper studies the main changes observed over the period 1988-1995 in the Italian trade with several Central and Eastern European (CEE) economies. The analysis is carried out using a number of methods. The first method consists of calculating the weight and the evolution of high and low quality intra-industry trade. The second method consists of looking at the features assumed by the trade reorientation using a Constant Market Share Analysis, able to break down the growth in CEE exports to Italy into a “demand” and a “competitiveness” share. Once verified the dominance of the latter, the paper tests by means of regression analysis to what extent the increased competitiveness has been determined by increased price competitiveness (term of trade effect) as opposed to quality upgrading. No evidence is found of the latter. A test of the employment effects associated with different sources of trade with the CEECs confirms the importance of monitoring the evolution of vertical and horizontal intra-industry trade and its impact on the adjustment process.