Marginal intra-industry trade and adjustment costs:the Australian experience

Thorpe, Michael; Leitão, Nuno Carlos

http://hdl.handle.net/10400.15/602

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Authors

Thorpe, Michael

Leitão, Nuno Carlos

Abstract(s)

The objective of this research is to investigate labour market adjustment in Australian manufacturing industry over the period 1992–2000, a time of significant adjustment in the country’s trade pattern. Specifically, the focus is on the so-called smooth adjustment hypothesis, which posits that, compared with inter-industry trade, intra-industry trade (IIT) expansion is associated with relatively lower factor adjustment costs. A dynamic panel data approach(GMM-System) is employed. We find that there is a negative correlation between changes in employment and increased IIT. This result provides support for the smooth adjustment hypothesis. Given the rise in IIT as a proportion of Australia’s overall trade during the period under review, the resulting traderelated adjustment in labour markets is likely to have been less than otherwise expected.

Keywords

Marginal intra-industry trade Labour market adjustment Dynamic panel data

URI

http://hdl.handle.net/10400.15/602

Citation

THORPE, Michael ; LEITÃO, Nuno Carlos - Marginal intra-industry trade and adjustment costs : the Australian experience. Economic Papers. ISSN 1759-3441. 31:1 (2012) 123-131. DOI 10.1111/j.1759-3441.2011.00156.x

Publisher

Wiley

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