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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
  • Saman Ghaderi

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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    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;
    All these keywords.

    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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