Thorpe, MichaelLeitão, Nuno Carlos2012-03-062012-03-062012-03THORPE, 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.x1759-3441http://hdl.handle.net/10400.15/602The 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.engMarginal intra-industry tradeLabour market adjustmentDynamic panel datajournal article