Portuguese intra-industry trade and labor market adjustment costs:the sah again

• Author(s): Faustino, Horácio C. ; Leitão, Nuno Carlos
• Date: 2012
• Persistent ID: http://hdl.handle.net/10400.15/646
• Origin: Repositório Científico do Instituto Politécnico de Santarém
• Subject(s): Adjustment costs; Dynamic panel data; Labor market; Marginal intra-industry trade; Smooth adjustment hypothesis; Portugal
• Document Type: Article
• Language: English

Description

This paper provides an empirical test of the SAH (smooth adjustment hypothesis) using the data on Portugal. According to the SAH, intra-industry trade leads to relatively lower adjustment costs in comparison to inter-industry trade. The paper tests the SAH by using a dynamic panel data analysis that takes into account lagged effects of changes in the MIIT (marginal intra-industry trade) index. The regressions use the absolute change in the total employment in a given industry as a proxy for trade adjustment costs. The main results imply that a higher MIIT leads to lower adjustment costs in the same year. More specifically, the coefficients of the MIIT index are negative and statistically significant in all the regressions. These results provide support for the SAH.