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US manufacturing and vertical/horizontal intra-industry trade: examining the smooth adjustment hypothesis

  • Roger White
  • Cheng Chen

Using data that represent the six-digit North American Industrial Classification System-classified industries that comprise the US manufacturing sector and that span the years 1989–2005, we test the validity of the smooth adjustment hypothesis (SAH). To our knowledge, this is the first examination of the SAH for the USA. The results of our empirical analysis are consistent with the confirmation of the SAH. Further, using measures of vertical marginal intra-industry trade and of horizontal marginal intra-industry trade, we find that the latter has a stronger effect on employment of production workers than does the former. The findings suggest that for total industry-level employment and for industry-level production worker employment, intra-industry trade expansion inherently involves lower adjustment costs as compared to inter-industry trade expansion.

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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: 1-20

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Handle: RePEc:ids:ijecbr:v:4:y:2012:i:1/2:p:1-20
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  1. Joanne Kathryn Lindley & Marius Brullhart & Rob Elliott, 2005. "Intra-industry trade and labour market adjustment: A reassessment using data on individual workers," Working Papers 2005005, The University of Sheffield, Department of Economics, revised May 2005.
  2. Greenaway, David & Hine, Robert C & Milner, Chris, 1995. "Vertical and Horizontal Intra-industry Trade: A Cross Industry Analysis for the United Kingdom," Economic Journal, Royal Economic Society, vol. 105(433), pages 1505-18, November.
  3. 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.
  4. Lovely, Mary E & Nelson, Douglas R, 2000. "Marginal Intraindustry Trade and Labor Adjustment," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 436-47, August.
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  7. 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.
  8. Chonira Aturupane & Simeon Djankov & Bernard Hoekman, 1999. "Horizontal and vertical intra-industry trade between Eastern Europe and the European union," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 135(1), pages 62-81, March.
  9. Brulhart, Marius, 2000. "Dynamics of Intraindustry Trade and Labor-Market Adjustment," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 420-35, August.
  10. Clive Hamilton & Paul Kniest, 1991. "Trade liberalisation, structural adjustment and intra-industry trade: A note," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(2), pages 356-367, June.
  11. 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.
  12. 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.
  13. Greenaway, David & Hine, Robert C. & Wright, Peter, 1999. "An empirical assessment of the impact of trade on employment in the United Kingdom," European Journal of Political Economy, Elsevier, vol. 15(3), pages 485-500, September.
  14. 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.
  15. 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.
  16. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
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