international trade, exports in particular, expanded considerably after the
major policy changes in 1990. According to this expansion, there was also a
significant increase in intra-industry trade even though the major
characteristic of Thailand trade is still inter-industry. However,
intra-industry trade is hypothesized to reduce adjustment costs due to trade
expansion and changes in trade compared to inter-industry trade. The main
purpose of this paper is to examine the effects of increased Intra-Industry
Trade (IIT) on the labor market adjustment cost, in view of the changes in
Thailand’s pattern of trade over the post-1990 period. The study is focused on
the hypothesis that Intra-Industry Trade (IIT) expansion entails lower factor
adjustment costs (Smooth Adjustment Hypothesis-SAH). A dynamic panel data
approach is employed. The results suggest a negative correlation between
changes in employment and Marginal Intra-Industry Trade (MIIT) and confirmation
of the SAH. Given the increase in IIT as a proportion of Thailand’s overall
trade during the period under review, the adjustment in labor markets in the
form of reduced employment from trade liberalization at that time is likely to
have been less than that would have otherwise been expected.
Cite this paper
S. Chemsripong, "Labor Costs and Marginal Intra-Industry Trade: The Thailand Experience," Theoretical Economics Letters
, Vol. 4 No. 1, 2014, pp. 125-131. doi: 10.4236/tel.2014.41019
 S. Chemsripong, “Economic Analysis of Intra-Industry Trade between Thailand and Other APEC Countries, 1990-1999,” Naresuan University Journal, Vol. 12, No. 3, 2004, pp. 27-42.
 S. Chemsripong, et al., “Regional Integration and IntraIndustry Trade in Manufactures between Thailand and Other APEC Countries,” The Singapore Economic Review, Vol. 54, No. 1, 2009, pp. 135-148. http://dx.doi.org/10.1142/S0217590809003148
 H. Grubel and P. Lloyd, “Intra-Industry Trade: The Theory and Measurement of International Trade in Differentiated Products,” The Mcmillian Press, London, 1975.
 B. Balassa “Tariff Reduction and Trade in Manufactures among Industrial Country,” American Economic Review, Vol. 56, No. 3, 1966, pp. 466-473.
 C. Hamilton and P. Kniest, “Trade Liberalisation, structural Adjustment and Intra-Industry Trade: A Note,” Weltwirtschaftliches Archiv, Vol. 127, No. 2, 1991, pp. 356-367. http://dx.doi.org/10.1007/BF02707991
 J. Menon and P. B. Dixon, “Intra-Industry versus InterIndustry Trade: Relevance for Adjustment Costs,” Weltwirtschaftliches Archiv, Vol. 133, No. 1, 1997, pp. 164-169. http://dx.doi.org/10.1007/BF02707682
 D. Greenaway, R. C. Hine, C. Milner and R. Elliott, “Adjustment and the Measurement of Marginal Intra-Industry Trade,” Weltwirtschaftliches Archiv, Vol. 130, No. 2, 1994, pp. 418-437. http://dx.doi.org/10.1007/BF02707717
 M. Brulhart and R. J. R. Elliott, “Labour-Market Effects of Intra Industry Trade: Evidence for the United Kingdom,” Weltwirtschaftliches Archiv, Vol. 138, No. 2, 2002, pp. 207-228. http://dx.doi.org/10.1007/BF02707742
 I. Ferto and A. K. Soors, “Marginal Intra-Industry Trade and Adjustment Costs in the First Phase of Transition: A Hungarian-Polish Comparison,” Journal of Economics Studies, Vol. 37, No. 5, 2010, pp. 495-504. http://dx.doi.org/10.1108/01443581011075433
 M. Brulhart, “Marginal Intra Industry Trade: Measurement and Relevance for the Pattern of Industrial Adjustment,” Weltwirtschaftliches Archiv, Vol. 130, No. 3, 1994, pp. 600-613. http://dx.doi.org/10.1007/BF02707615
 M. Brulhart, “Dynamics of Intra Industry Trade and Labor-Market Adjustments,” Review of International Economics, Vol. 8, No. 3, 2000, pp. 420-435. http://dx.doi.org/10.1111/1467-9396.00232
 M. E. Lovely and D. Nelson, “Marginal Intraindustry Trade and Labour Adjustment,” Review of International Economic, Vol. 8, No. 3, 2000, pp. 436-447.
 I. Ferto, “Labour Market Adjustment and Intra-Industry Trade: The Effects of Association on Hungarian Food Industry,” Journal of Agricultural Economics, Vol. 60, No. 3, 2009, pp. 668-681. http://dx.doi.org/10.1111/j.1477-9552.2009.00201.x
 M. Brulhart and M. Thorpe, “Intra-Industry Trade and Adjustment in Malaysia: Puzzling Evidence,” Applied Economics Letters, Vol. 7, No. 11, 2000, pp. 729-733. http://dx.doi.org/10.1080/135048500421368
 G. Erlart and H. Erlat, “Intra-Industry Trade and Labor Market Adjustment in Turkey: Another Piece of Puzzling Evidence,” Emerging Markets Finance and Trade, Vol. 42, No. 5, 2006, pp. 5-27. http://dx.doi.org/10.2753/REE1540-496X420501
 M. Cabral and J. Silva, “Intra-Industry Trade Expansion and Employment Reallocation between Sectors and Occupations,” Review of World Economics, Vol. 142, No. 3, 2006, pp. 496-520. http://dx.doi.org/10.1007/s10290-006-0078-4
 A. K. M. Azhar and R. J. R. Elliott, “On the Measurement of Changes in Product Qualityin Marginal Intra Industry Trade,” Review of World Economics, Vol. 144, No. 2, 2008, pp. 225-247. http://dx.doi.org/10.1007/s10290-008-0145-0
 R. Blundell and S. Bond, “Initial Conditions and Moment Restrictions in Dynamic Panel Data Models,” Journal of Econometrics, Vol. 87, No. 1, 1998, pp. 115-143. http://dx.doi.org/10.1016/S0304-4076(98)00009-8
 R. Blundell and S. Bond, “GMM Estimation with Persistent Panel Data: An Applications to Production Functions,” Economics Review, Vol. 19, No. 3, 2000, pp. 321340. http://dx.doi.org/10.1080/07474930008800475