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Marginal intra‐industry trade and adjustment costs in the first phase of transition

Author

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  • Imre Fertő
  • Károly Attila Soós
Abstract
Purpose - The aim of the paper is to investigate some dynamic aspects of the smooth adjustment hypothesis (SAH) associated with intra‐industry trade (IIT). The structure of trade expansion in Hungary and Poland over the period 1990‐1998 and its implications for labour market adjustment is examined. Design/methodology/approach - The paper applies an econometric approach and considers three‐digit International Standard Industry Classification classified data. The paper uses a model developed by recent empirical literature, both in static and dynamic forms and tests whether the results are sensitive for the choice of length of period and marginal intra‐industry indices. Findings - The econometric analysis suggests that changes in domestic consumption and productivity have significant influence on employment changes. Significant and negative relationships were found between trade openness and employment changes. The calculations provide some evidence to support SAH, especially for Poland. However, the effects of IIT on employment changes are small especially to additional hypotheses. The estimations show that partial trade liberalisation in Hungary and Poland has led to lower adjustment costs. Originality/value - The paper is one of the first to focus on labour market adjustment costs in transition countries. Its results also reveal that the estimations on the impacts of trade liberalisations should be interpreted only with care due to sensitivity on the length of time period and applied econometric techniques.

Suggested Citation

  • Imre Fertő & Károly Attila Soós, 2010. "Marginal intra‐industry trade and adjustment costs in the first phase of transition," Journal of Economic Studies, Emerald Group Publishing Limited, vol. 37(5), pages 495-504, September.
    • Handle: RePEc:eme:jespps:v:37:y:2010:i:5:p:495-504
    DOI: 10.1108/01443581011075433
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    Citations

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    Cited by:

    1. Mitchell Kellman & Mitchell Yochanan Shachmurove, 2012. "Trade Sophistication in a Transition Economy: Poland 1980–2009," Working Papers 64, Department of Applied Econometrics, Warsaw School of Economics.
    2. Varma, Poornima & Issar Akash, 2017. "Intra-Industry Trade and Labour Market Adjustment: Indian Manufacturing Sector," IIMA Working Papers WP 2017-04-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
    3. Sakshi Aggarwal & Debashis Chakraborty, 2020. "Labour Market Adjustment and Intra-Industry Trade: Empirical Results from Indian Manufacturing Sectors," Journal of South Asian Development, , vol. 15(2), pages 238-269, August.
    4. Manuel Cabral & Joana Silva, 2006. "Intra-Industry Trade Expansion and Employment Reallocation between Sectors and Occupations," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 142(3), pages 496-520, October.

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