Dynamics of Intraindustry Trade and Labor‐Market Adjustment

Marius Brülhart

Review of International Economics, 2000, vol. 8, issue 3, 420-435

Abstract: This paper investigates some dynamic aspects of the ‘smooth adjustment hypothesis’ that is commonly associated with intraindustry trade (IIT). The analysis is conducted on a panel of plant‐level employment data and industry‐level production and trade data for Ireland. Rates of intraindustry job turnover are used as a proxy for labor‐market adjustment. Three findings stand out. First, a measure of marginal IIT is found to be more appropriate for the analysis of adjustment issues than the traditional static IIT index. Second, the effect of marginal IIT on labor‐market adjustment is most significant in the short term, namely for indices calculated on one‐year ntervals and lagged by one year. Third, the most significant determinants of the intraindustry job turnover rate are sector‐level plant concentration ratios and trade openness.

Date: 2000
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