GEP Research Paper 98/04

Intra-industry Trade and Job Turnover

Marius Brülhart, Anthony Murphy and Eric Strobl

Abstract

In this study we examine the widely held view that intra-industry trade (IIT) entails relatively low adjustment costs. We construct a panel of industry level trade, production and employment data for Ireland. IIT is calculated using the conventional Grubel-Lloyd index as well as alternative measures of marginal IIT. Our measure of labour adjustment is defined as the share of intra-industry job turnover in an industry's total job turnover. Ceteris paribus, we find no relationship between the Grubel-Lloyd index of IIT and our measure of labour adjustment; however, we find that marginal IIT has a small positive effect on the reallocation of labour within an industry. These results support the "smooth adjustment hypothesis" if IIT is understood in the sense of marginal IIT, and if labour reallocation is less costly within than between industries.

Issued in December 1998.

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