East-Asian Export Growth, Intra-Industry Trade and Adjustment

This paper investigates the structure East Asian trade flows over the high-growth period of 1970-1996. Data for Korea, Malaysia, Indonesia and the Philippines are analysed, using measures of static intra-industry trade (Grubel-Lloyd index) and of dynamic (marginal) intra-industry trade. Inferences drawn from those results are based on the “smooth adjustment hypothesis”, according to which intra-industry trade expansion entails relatively low factor-market adjustment costs. It is found that, despite the different development levels of the four sample countries, static as well as marginal IIT in each case has grown steadily over the period of the study. The changing structure of East Asian trade patterns thus indicates that less labour adjustment pressures are being experienced over time, both domestically and by partners. This tendency is more pronounced in intra-East Asian trade than in trade with the United States and the European Union.