Marginal Intra-Industry Trade and Adjustment Costs: The Australian Experience

9 Pages Posted: 15 Jan 2014

See all articles by Michael Thorpe

Michael Thorpe

Curtin University of Technology - Curtin Business School - Bentley Campus

Nuno Carlos Leitão

affiliation not provided to SSRN

Date Written: May 01, 2011

Abstract

The objective of this research is to investigate labour market adjustment associated with changes in Australia’s trade pattern over the period 1992-2000. Specifically the focus is on the so-called smooth adjustment hypothesis (SAH) 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 SAH. Given the rise in IIT as a proportion of Australia’s overall trade during the period under review, the adjustment in labour markets stemming from trade liberalisation at that time is likely to have been less than otherwise expected.

Keywords: Marginal intra-industry trade, labour market adjustment, dynamic panel data

Suggested Citation

Thorpe, Michael and Leitão, Nuno Carlos, Marginal Intra-Industry Trade and Adjustment Costs: The Australian Experience (May 01, 2011). CRAE Research Paper No. 201102. Available at SSRN: https://ssrn.com/abstract=2379234 or http://dx.doi.org/10.2139/ssrn.2379234

Michael Thorpe (Contact Author)

Curtin University of Technology - Curtin Business School - Bentley Campus ( email )

GPO Box U1987
Perth WA 6845
Australia
+61 8 9266 3416 (Phone)
+61 8 9266 3026 (Fax)

Nuno Carlos Leitão

affiliation not provided to SSRN

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