Effect of Marginal Intra-Industry Trade on Excess Job Reallocation in Iran's Manufacturing Industries

According to the recent literature, the expansion of intra-industry trade increases the intra-industrial excess job reallocation. Based on Lovely and Nelson (2002), this study examined the hypothesis that marginal intra-industry trade has a positive effect on the excess job reallocation in Iranian industries. Therefore, we have employed a panel technique for Iranian manufacturing industries at the 3-digit ISIC classification over the period 2002-2006. The results show that the expansion of marginal intra-industry trade increases the excess job reallocation that probably decreases the adjustment costs in industrial labour market. Therefore, we suggest that the government should pay more attention to intra-industry trade in order to control and reduce the adjustment costs of trade expansion and liberalization.