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The objective of this study is to provide some empirical evidences on the existence of labor market adjustments according to smooth adjustment hypothesis (SAH) under the impact of intra-industry trade (IIT) considering the Portuguese case over a time span between 1995 and 2006. The main methodological issue of this study consists in showing that it is preferable to use the GMM-System approach with orthogonal transformation of data. The key outcome consists in highlighting a negative linkage between marginal intra-industry trade and the amplitude of employment changes for this particular market. In addition, we find a negative correlation between changes of employment and changes in domestic consumption. Moreover, the relationship between growth of productivity and market structure is according to smooth adjustment hypothesis.
Leitão, Nuno Carlos; Dima, Bogdan; and Dima (Cristea), Stefana, "Marginal Intra-industry Trade and Adjustment Costs in Labour Market" (May 22, 2013). Fondazione Eni Enrico Mattei Working Papers. Paper 790.