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Marginal intra-industry trade and adjustment costs in the first phase of transition: A Hungarian-Polish comparison


  • Imre Ferto
  • Károly Attila Soós


Purpose - The aim of the paper is to investigate some dynamic aspects of the smooth adjustment hypothesis (SAH) associated with intra-industry trade (IIT). The structure of trade expansion in Hungary and Poland over the period 1990-1998 and its implications for labour market adjustment is examined. Design/methodology/approach - The paper applies an econometric approach and considers three-digit International Standard Industry Classification classified data. The paper uses a model developed by recent empirical literature, both in static and dynamic forms and tests whether the results are sensitive for the choice of length of period and marginal intra-industry indices. Findings - The econometric analysis suggests that changes in domestic consumption and productivity have significant influence on employment changes. Significant and negative relationships were found between trade openness and employment changes. The calculations provide some evidence to support SAH, especially for Poland. However, the effects of IIT on employment changes are small especially to additional hypotheses. The estimations show that partial trade liberalisation in Hungary and Poland has led to lower adjustment costs. Originality/value - The paper is one of the first to focus on labour market adjustment costs in transition countries. Its results also reveal that the estimations on the impacts of trade liberalisations should be interpreted only with care due to sensitivity on the length of time period and applied econometric techniques.

Suggested Citation

  • Imre Ferto & Károly Attila Soós, 2010. "Marginal intra-industry trade and adjustment costs in the first phase of transition: A Hungarian-Polish comparison," Journal of Economic Studies, Emerald Group Publishing, vol. 37(5), pages 495-504, September.
  • Handle: RePEc:eme:jespps:v:37:y:2010:i:5:p:495-504

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    References listed on IDEAS

    1. Konstantin Gluschenko, 2004. "Analysing changes in market integration through a cross-sectional test for the law of one price," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(2), pages 135-149.
    2. Engel, Charles & Rogers, John H, 1996. "How Wide Is the Border?," American Economic Review, American Economic Association, vol. 86(5), pages 1112-1125, December.
    3. Engel, Charles & Rogers, John H, 2001. "Violating the Law of One Price: Should We Make a Federal Case Out of It?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 33(1), pages 1-15, February.
    4. Stephen G. Cecchetti & Nelson C. Mark & Robert J. Sonora, 2002. "Price Index Convergence Among United States Cities," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(4), pages 1081-1099, November.
    5. Berkowitz, Daniel & DeJong, David N., 2003. "Regional integration: an empirical assessment of Russia," Journal of Urban Economics, Elsevier, vol. 53(3), pages 541-559, May.
    6. Parsley, David C. & Wei, Shang-Jin, 2001. "Explaining the border effect: the role of exchange rate variability, shipping costs, and geography," Journal of International Economics, Elsevier, vol. 55(1), pages 87-105, October.
    7. David C. Parsley & Shang-Jin Wei, 1996. "Convergence to the Law of One Price Without Trade Barriers or Currency Fluctuations," The Quarterly Journal of Economics, Oxford University Press, vol. 111(4), pages 1211-1236.
    8. David Parsley Shang-Jin Wei, 2002. "Currency Arrangements And Goods Market Integration: A Price Based Approach," International Finance 0211004, EconWPA.
    9. Konstantin Gluschenko, 2003. "Market integration in Russia during the transformation years," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 11(3), pages 411-434, September.
    10. Daniel Berkowitz & David N. DeJong, 2001. "The evolution of market integration in Russia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 9(1), pages 87-104, March.
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    Cited by:

    1. Mitchell Kellman & Mitchell Yochanan Shachmurove, 2012. "Trade Sophistication in a Transition Economy: Poland 1980–2009," Working Papers 64, Department of Applied Econometrics, Warsaw School of Economics.

    More about this item


    Trade; Costs; National economy; Labour market; Hungary; Poland;


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