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Smooth and Sticky Adjustment: A Comparative Analysis of the US and UK

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  • Michelle Haynes
  • Richard Upward
  • Peter Wright

Abstract

This paper adopts the methodology of the microeconometric labor literature to analyze a common assertion from trade economists that reallocation within sectors is less costly than between sectors. Findings are compared across two countries (the UK and US) which have experienced very different recent aggregate unemployment experiences. Workers previously employed in “declining” sectors are more mobile than those employed in ‘expanding’ sectors in both countries, and individuals are more likely to switch sector the longer they are unemployed. A plausible explanation for this is that individuals initially attempt to find jobs that complement their general and specific skills in order to accrue the associated rewards, and move sector only as this prospect diminishes. This would seem to accord with the ‘smooth adjustment hypothesis’ which proposes that intraindustry adjustments are less costly than interindustry ones.

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  • Michelle Haynes & Richard Upward & Peter Wright, 2000. "Smooth and Sticky Adjustment: A Comparative Analysis of the US and UK," Review of International Economics, Wiley Blackwell, vol. 8(3), pages 517-532, August.
    • Handle: RePEc:bla:reviec:v:8:y:2000:i:3:p:517-532
    DOI: 10.1111/1467-9396.00239
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    Cited by:

    1. T. Huw Edwards & John Whalley, 2002. "Short and Long Run Decompositions of OECD Wage Inequality Changes," NBER Working Papers 9265, National Bureau of Economic Research, Inc.
    2. Abdul Azhar & Robert Elliott, 2003. "On the measurement of trade-induced adjustment," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 139(3), pages 419-439, September.
    3. Roberto Leombruni & Roberto Quaranta, 2002. "The Unemployment Route to Versatility," LABORatorio R. Revelli Working Papers Series 16, LABORatorio R. Revelli, Centre for Employment Studies.
    4. Terence Huw Edwards & John Whalley, 2007. "Short‐ And Long‐Run Decompositions Of Uk Wage Inequality Changes," Bulletin of Economic Research, Wiley Blackwell, vol. 59(1), pages 1-24, January.
    5. R J R Elliott & J Lindley, 2003. "Trade, Skills and Adjustment Costs: A Study of Intra-Sectoral Labour Mobility in the UK," Economics Discussion Paper Series 0312, Economics, The University of Manchester.
    6. Mónica Rivera, 2014. "Trade patterns in the process of European integration: Evidence for the intraindustrial exchanges of a Mediterranean peripheral region," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(1), pages 227-249, January.

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