The proxy variables for differences in factor endowments (physical and human) are
statistically significant in both IIT and VIIT model. Both variables have a negative
effect on IIT as predicted but not for VIIT. This findings are, somewhat, consistent with
previous studies on IIT as the share of vertical IIT in total trade volume between two
countries is expected to be higher for a greater difference in factor endowments
between the two countries. For the case of VIIT, one explanation of this phenomenon is
that selected variables may not be a good proxy of differences in factor endowment in
term of VIIT’s determinants.