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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

Suggested Citation

  • Saeed Rasekhi & Saman Ghaderi, 2013. "Marginal Intra-Industry Trade and Employment Reallocation: The Case Study of Iran’s Manufacturing Industries," Journal of Industry, Competition and Trade, Springer, vol. 13(3), pages 417-429, September.
  • Handle: RePEc:kap:jincot:v:13:y:2013:i:3:p:417-429
    DOI: 10.1007/s10842-012-0128-7
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    References listed on IDEAS

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    1. J. David Brown & John S. Earle, "undated". "The Reallocation of Workers and Jobs in Russian Industry: New Evidence on Measures and Determinants," Upjohn Working Papers and Journal Articles jse20031, W.E. Upjohn Institute for Employment Research.
    2. Manuel Cabral & Joana Silva, 2006. "Intra-Industry Trade Expansion and Employment Reallocation between Sectors and Occupations," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(3), pages 496-520, October.
    3. 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.
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    7. Krugman, Paul R, 1981. "Intraindustry Specialization and the Gains from Trade," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 959-973, October.
    8. Michelle Haynes & Richard Upward & Peter Wright, 2002. "Estimating the wage costs of inter- and intra- sectoral adjustment," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 138(2), pages 229-253, June.
    9. 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.
    10. Horácio Faustino & Nuno Leitão, 2009. "Intra-industry trade and labor costs: The smooth adjustment hypothesis," Working Papers Department of Economics 2009/17, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
    11. 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.
    12. 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 - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.
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    More about this item

    Keywords

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

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • J62 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Job, Occupational and Intergenerational Mobility; Promotion
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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