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Intra-Industry Trade Expansion and Employment Reallocation between Sectors and Occupations

Manuel Cabral and Joana Silva
Review of World Economics / Weltwirtschaftliches Archiv
Vol. 142, No. 3 (Oct., 2006), pp. 496-520
Published by: Springer
Stable URL: http://www.jstor.org/stable/40441105
Page Count: 25
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Intra-Industry Trade Expansion and Employment Reallocation between Sectors and Occupations
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Abstract

This paper re-examines the relationship between trade and labour market adjustment costs by explicitly considering the effects of occupational mobility. We investigate the hypothesis that intra-industry trade expansion entails lower adjustment costs than inter-industry trade expansion—the so-called Smooth Adjustment Hypothesis (SAH). This paper makes two new contributions. First, the introduction of a new adjustment variable that considers reallocation between sectors and occupations. Second, a test of the SAH using panel data with relevant trade and non-trade control variables, which overcomes some of the methodological limitations of former studies. The results suggest a confirmation of the SAH and stress the importance of considering the effects of worker moves between occupations in the study of trade-induced adjustment.

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