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Review of World Economics

, Volume 142, Issue 3, pp 496–520 | Cite as

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

  • Manuel Cabral
  • Joana SilvaEmail author
Article

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.

Keywords

Intra-industry trade worker mobility labour market adjustment 

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Copyright information

© The Kiel Institute 2006

Authors and Affiliations

  1. 1.School of Economics and ManagementUniversity of MinhoBragaPortugal
  2. 2.School of Economics and GEP, Office B52University of NottinghamNottinghamUnited Kingdom

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