Title: US manufacturing and vertical/horizontal intra-industry trade: examining the smooth adjustment hypothesis

Authors: Roger White; Cheng Chen

Addresses: Department of Economics, Franklin & Marshall College, 415 Harrisburg Pike, Lancaster, PA 17603, USA ' Department of Economics, Franklin & Marshall College, 415 Harrisburg Pike, Lancaster, PA 17603, USA

Abstract: Using data that represent the six-digit North American Industrial Classification System-classified industries that comprise the US manufacturing sector and that span the years 1989–2005, we test the validity of the smooth adjustment hypothesis (SAH). To our knowledge, this is the first examination of the SAH for the USA. The results of our empirical analysis are consistent with the confirmation of the SAH. Further, using measures of vertical marginal intra-industry trade and of horizontal marginal intra-industry trade, we find that the latter has a stronger effect on employment of production workers than does the former. The findings suggest that for total industry-level employment and for industry-level production worker employment, intra-industry trade expansion inherently involves lower adjustment costs as compared to inter-industry trade expansion.

Keywords: adjustment costs; manufacturing industry; horizontal trade; vertical trade; marginal trade; smooth adjustment hypothesis; USA; United States; employment; production workers; trade expansion; economics; business research; intra-industry trade.

DOI: 10.1504/IJEBR.2012.044241

International Journal of Economics and Business Research, 2012 Vol.4 No.1/2, pp.1 - 20

Received: 08 May 2021
Accepted: 12 May 2021

Published online: 14 Dec 2011 *

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