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Marginal Intra-Industry Trade and Employment Reallocation: The Case Study of Iran’s Manufacturing Industries

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  • Saeed Rasekhi

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  • Saman Ghaderi

    ()

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    Abstract

    The purpose of this paper is to test the smooth adjustment hypothesis by using panel technique for Iran’s manufacturing industries at the 4-digit aggregation level of ISIC classification, during time period 2001–2006. According to the smooth adjustment hypothesis, intra-industry trade expansion entails lower adjustment costs than inter-industry one. In this paper, by distinguishing marginal intra industry trade to its horizontal and vertical types and employing the total reallocation effect as a proxy of the adjustment cost of reallocation between sectors and occupations, we’ve tested smooth adjustment hypothesis for both marginal intra industry trade and its types. So, comparing with other empirical studies, this paper has used marginal vertical and horizontal intra industry trade as well as marginal intra industry trade to test the hypothesis. The obtained results do not support the hypothesis for marginal intra industry trade. On the other hand, by distinguishing marginal intra industry trade to marginal horizontal and vertical intra-industry trade, this hypothesis is expectedly confirmed. This result is justifiable since marginal horizontal intra industry trade is a change of intra industry trade with the similar factor intensity while marginal vertical intra industry trade is mainly based on the differences in factor endowment. Copyright Springer Science+Business Media New York 2013

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    Bibliographic Info

    Article provided by Springer in its journal Journal of Industry, Competition and Trade.

    Volume (Year): 13 (2013)
    Issue (Month): 3 (September)
    Pages: 417-429

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    Handle: RePEc:kap:jincot:v:13:y:2013:i:3:p:417-429

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    Web page: http://springerlink.metapress.com/link.asp?id=105724

    Related research

    Keywords: smooth adjustment hypothesis; marginal horizontal intra-industry trade; marginal vertical intra-industry trade; employment reallocation; manufacturing industries; panel data; Iran; F16; J62; C33;

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    1. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    2. J. David Brown & John S. Earle, 2002. "The Reallocation of Workers and Jobs in Russian Industry: New Evidence on Measures and Determinants," William Davidson Institute Working Papers Series 490, William Davidson Institute at the University of Michigan.
    3. Haynes, Michelle & Upward, Richard & Wright, Peter, 2001. "Estimating the Wage Costs of Inter- and Intra-Sectoral Adjustment," CEPR Discussion Papers 2710, C.E.P.R. Discussion Papers.
    4. 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.
    5. Shin, Kwanho, 1997. "Inter- and Intrasectoral Shocks: Effects on the Unemployment Rate," Journal of Labor Economics, University of Chicago Press, vol. 15(2), pages 376-401, April.
    6. David Greenaway & Michelle Haynes & Chris Milner, 2002. "Adjustment, employment characteristics and intra-industry trade," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 138(2), pages 254-276, June.
    7. 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.
    8. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, issue Nov, pages 2-20.
    9. Greenaway, David & Upward, Richard & Wright, Peter, 2000. "Sectoral Transformation and Labour-Market Flows," Oxford Review of Economic Policy, Oxford University Press, vol. 16(3), pages 57-75, Autumn.
    10. 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.
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