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Marginal Intraindustry Trade and Labor Adjustment

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Author Info
Lovely, Mary E
Nelson, Douglas R

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Abstract

In the context of Ethier's model of the division of labor, this paper accomplishes three tasks. First, it complements existing literature on the algebraic properties of marginal intraindustry trade (MIIT) measures by embedding one of these measures in a general equilibrium model. Consistent with the existing literature, it is found that change in the Grubel-Lloyd index provides systematically different economic information from change in the MIIT index. Second, it examines the connection between intraindustry trade and intra- industry adjustment. Here it is found that the informal assumption that intraindustry trade generates only intraindustry adjustment cannot be sustained. That is, intraindustry trade will generally induce interindustry adjustment. Finally, because intraindustry trade generates interindustry adjustment, increased intraindustry trade will generally induce long-run changes in relative factor prices. This suggests, given the prominence of intraindustry trade in OECD countries, that there may be problems with inference on the link between trade and wages undertaken in a strict Heckscher-Ohlin framework. Copyright 2000 by Blackwell Publishing Ltd.

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Publisher Info
Article provided by Blackwell Publishing in its journal Review of International Economics.

Volume (Year): 8 (2000)
Issue (Month): 3 (August)
Pages: 436-47
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Handle: RePEc:bla:reviec:v:8:y:2000:i:3:p:436-47

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  1. Joseph Francois, 2004. "Assessing the Impact of Trade Policy on Labor Markets and Production," Tinbergen Institute Discussion Papers 04-058/2, Tinbergen Institute. [Downloadable!]
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  2. Joseph F. Francois & Douglas Nelson, 2002. "A Geometry Of Specialisation," Economic Journal, Royal Economic Society, vol. 112(481), pages 649-678, July. [Downloadable!] (restricted)
    Other versions:
  3. Joseph Francois & Kevin Grier & Douglas Nelson, 2004. "Globalization, Roundaboutness, and Relative Wages," Tinbergen Institute Discussion Papers 04-021/2, Tinbergen Institute. [Downloadable!]
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