Marginal intra-industry trade and adjustment costs: the case study of Iranâ€™s manufacturing industries
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 Iranâ€™s manufacturing industries during 2002â€“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.
Volume (Year): 4 (2012)
Issue (Month): 1/2 ()
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