Title: Marginal intra-industry trade and adjustment costs: the case study of Iran’s manufacturing industries

Authors: Saeed Rasekhi; Saman Ghaderi

Addresses: Faculty of Economics and Administrative Science, Department of Economics, University of Mazandaran, Air Force Ave, Babolsar, Iran ' Department of Economics, University of Mazandaran, Air Force Ave, Babolsar, Iran

Abstract: According to smooth adjustment hypothesis (SAH), intra-industry trade (IIT) has low adjustment cost compared with inter-industry trade. The purpose of this paper is to examine the hypothesis by using panel technique for Iran’s manufacturing industries during 2002–2006. Comparing with other empirical studies, this paper has used marginal horizontal and vertical IIT as well as marginal intra-industry trade (MIIT) to test SAH. The obtained results do not support the mentioned hypothesis for MIIT. On the other hand, by distinguishing MIIT to marginal horizontal and vertical IIT, this hypothesis is confirmed for the former. This result is justifiable since marginal horizontal IIT is a change of IIT with similar factor intensity, whereas marginal vertical IIT is mainly based on differences in factor endowment.

Keywords: smooth adjustment hypothesis; horizontal trade; vertical trade; marginal trade; adjustment costs; Iran; manufacturing industry; panel data; inter-industry trade; factor intensity; factor endowment; economics; business research; intra-industry trade.

DOI: 10.1504/IJEBR.2012.044243

International Journal of Economics and Business Research, 2012 Vol.4 No.1/2, pp.35 - 43

Received: 08 May 2021
Accepted: 12 May 2021

Published online: 14 Dec 2011 *

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