Intra-industry trade: analysis of the smooth adjustment hypothesis with respect to Brazil

Abstract

The aim of this study is to analyze the smooth adjustment hypothesis (SAH) for the Brazilian economy during the period from 1997 to 2008. This study incorporates two approaches to the construction of the variable for labor market adjustment. Theoretically, we expect an inverse relationship between marginal intra-industry trade and the movement of workers in the industries that engage in foreign trade. Therefore, we use the econometric approach and dynamic panel data. The empirical results show that the hypothesis does not hold true for Brazil in the period examined.