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Marginal intra-industry trade and adjustment costs: the case study of Iran’s manufacturing industries

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  • Saeed Rasekhi
  • Saman Ghaderi
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    Abstract

    According to smooth adjustment hypothesis (SAH), intra-industry trade (IIT) has low adjustment cost compared with inter-industry trade. The purpose of this paper is to examine the hypothesis by using panel technique for Iran’s manufacturing industries during 2002–2006. Comparing with other empirical studies, this paper has used marginal horizontal and vertical IIT as well as marginal intra-industry trade (MIIT) to test SAH. The obtained results do not support the mentioned hypothesis for MIIT. On the other hand, by distinguishing MIIT to marginal horizontal and vertical IIT, this hypothesis is confirmed for the former. This result is justifiable since marginal horizontal IIT is a change of IIT with similar factor intensity, whereas marginal vertical IIT is mainly based on differences in factor endowment.

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    Bibliographic Info

    Article provided by Inderscience Enterprises Ltd in its journal Int. J. of Economics and Business Research.

    Volume (Year): 4 (2012)
    Issue (Month): 1/2 ()
    Pages: 35-43

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    Handle: RePEc:ids:ijecbr:v:4:y:2012:i:1/2:p:35-43

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    Web page: http://www.inderscience.com/browse/index.php?journalID==310

    Related research

    Keywords: smooth adjustment hypothesis; horizontal trade; vertical trade; marginal trade; adjustment costs; Iran; manufacturing industry; panel data; inter-industry trade; factor intensity; factor endowment; economics; business research; intra-industry trade.;

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    1. Marius Brülhart & Robert J.R. Elliott, 1998. "Adjustment to the European single market: inferences from intra-industry trade patterns," Journal of Economic Studies, Emerald Group Publishing, vol. 25(3), pages 225-247, September.
    2. Imre Ferto & Károly Attila Soos, 2008. "Marginal Intra-Industry Trade and Adjustment Costs - A Hungarian-Polish Comparison," IEHAS Discussion Papers 0815, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    3. Horácio C. Faustino & Nuno Carlos Leitão, 2010. "The Portuguese intra-industry tradeand the labor market adjustment costs: The SAH Again," Working Papers Department of Economics 2010/08, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    4. Marius Brulhart & Michael Thorpe, 2000. "Intra-industry trade and adjustment in Malaysia: puzzling evidence," Applied Economics Letters, Taylor & Francis Journals, vol. 7(11), pages 729-733.
    5. Robert J. R. Elliott & Joanne K. Lindley, 2006. "Trade, Skills and Adjustment Costs: A Study of Intra-Sectoral Labor Mobility," Review of Development Economics, Wiley Blackwell, vol. 10(1), pages 20-41, 02.
    6. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-73, October.
    7. Marius Brülhart & Robert J. R. Elliott & Joanne Lindley, 2006. "Intra-Industry Trade and Labour-Market Adjustment: A Reassessment Using Data on Individual Workers," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(3), pages 521-545, October.
    8. Marius Brülhart & Robert Elliott, 2002. "Labour-market effects of intra-industry trade: Evidence for the United Kingdom," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 207-228, June.
    9. Lionel Fontagné & Michaël Freudenberg & Nicolas Peridy, 1997. "Trade Patterns Inside the Single Market," Working Papers 1997-07, CEPII research center.
    10. Marius Brülhart, 1994. "Marginal intra-industry trade: Measurement and relevance for the pattern of industrial adjustment," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 130(3), pages 600-613, September.
    11. Horácio Faustino & Nuno Leitão, 2009. "Intra-industry trade and labor costs: The smooth adjustment hypothesis," Working Papers Department of Economics 2009/17, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
    12. Manuel Cabral & Joana Silva, 2006. "Intra-Industry Trade Expansion and Employment Reallocation between Sectors and Occupations," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 142(3), pages 496-520, October.
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