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Abstract

We analyze the welfare effects of conditional trade adjustment assistance (i.e. assistance that is received only if displaced workers remain unemployed), and compare the conditional program with unconditional assistance. Taking the level of assistance as exogenous, we show that either the conditional or unconditional program may impose greater efficiency costs, depending on underlying parameters. We then introduce an explicit social welfare function and solve for the optimal level of assistance for each program. Finally, we compare the optimized values of the two programs. If the distribution of wage offers is uniform, the unconditional program is welfare superior.

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File URL: http://www.sciencedirect.com/science/article/B6V6D-458XN1R-2Y/2/dec7bd7d6faedb31a3d7540068332a81
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 36 (1994)
Issue (Month): 3-4 (May)
Pages: 239-261

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Handle: RePEc:eee:inecon:v:36:y:1994:i:3-4:p:239-261

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Web page: http://www.elsevier.com/locate/inca/505552

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1. Bhagwati, Jagdish N. & Brecher, Richard A. & Srinivasan, T. N., 1984. "DUP activities and economic theory," European Economic Review, Elsevier, vol. 24(3), pages 291-307, April.
2. Clarete, Ramon L. & Whalley, John, 1987. "Comparing the marginal welfare costs of commodity and trade taxes," Journal of Public Economics, Elsevier, vol. 33(3), pages 357-362, August.
3. Feldstein, Martin & Poterba, James, 1984. "Unemployment insurance and reservation wages," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 141-167.
   
   • Martin Feldstein & James M. Poterba, 1984. "Unemployment Insurance and Reservation Wages," NBER Working Papers 1011, National Bureau of Economic Research, Inc.
4. Blau, David M. & Robins, Philip K., 1986. "Job search, wage offers, and unemployment insurance," Journal of Public Economics, Elsevier, vol. 29(2), pages 173-197, March.
5. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
6. Stuart, Charles E, 1984. "Welfare Costs per Dollar of Additional Tax Revenue in the United States," American Economic Review, American Economic Association, vol. 74(3), pages 352-62, June.

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Cited by:

1. Robert C. Feenstra & Tracy R. Lewis, 1991. "Trade Adjustment Assistance and Pareto Gains From Trade," NBER Working Papers 3845, National Bureau of Economic Research, Inc.
   
   • Feenstra, Robert C. & Lewis, Tracy R., 1994. "Trade adjustment assistance and Pareto gains from trade," Journal of International Economics, Elsevier, vol. 36(3-4), pages 201-222, May.
   • Feenstra, R.C. & Lewis, T.R., 1989. "Trade Adjustment Assistance And Pareto Gains From Trade," Papers 343, California Davis - Institute of Governmental Affairs.
2. Feestra, R.C. & Lewis, T.R. & Mcmillan, J., 1989. "Designing Policies To Open Trade," Papers 349, California Davis - Institute of Governmental Affairs.
   
   • Robert C. Feenstra & Tracy R. Lewis & John McMillan, 1990. "Designing Policies to Open Trade," NBER Working Papers 3258, National Bureau of Economic Research, Inc.
3. Carl Davidson & Steven Matusz, 2005. "Trade Liberalization and Compensation," International Trade 0503008, EconWPA.
   
   • Carl Davidson & Steven J. Matusz, 2006. "Trade Liberalization And Compensation," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 47(3), pages 723-747, 08.
4. Kletzer, Lori, 2003. "Trade-related Job Loss and Wage Insurance: A Synthetic Review," Santa Cruz Center for International Economics, Working Paper Series qt27w182ht, Center for International Economics, UC Santa Cruz.
5. Burfisher, Mary E. & Hanson, Kenneth & Hopkins, Jeffrey W. & Somwaru, Agapi, 2004. "Global Agricultural Reform and U.S. Agricultural Adjustment Capacity," IAPRAP\IATRC Summer Symposium, Adjusting to Domestic and International Agricultural Reform in Industrial Countries, June 6-7, 2004, Philadelphia, PA 15763, International Agricultural Policy Reform and Adjustment Project (IAPRAP).
   
   • Hanson, Kenneth & Burfisher, Mary E. & Hopkins, Jeffrey W. & Somwaru, Agapi, 2004. "Global Agricultural Reform And U.S. Agricultural Adjustment Capacity," 2004 Annual meeting, August 1-4, Denver, CO 20348, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
6. Ethier, Wilfred J., 2001. "Theoretical problems in negotiating trade liberalization," European Journal of Political Economy, Elsevier, vol. 17(2), pages 209-232, June.
7. Saint-Paul, Gilles, 2007. "Making sense of Bolkestein-bashing: Trade liberalization under segmented labor markets," Journal of International Economics, Elsevier, vol. 73(1), pages 152-174, September.
   
   • Saint-Paul, Gilles, 2005. "Making Sense of Bolkestein-Bashing: Trade Liberalization Under Segmented Labour Markets," CEPR Discussion Papers 5100, C.E.P.R. Discussion Papers.
   • Saint-Paul, Gilles, 2005. "Making Sense of Bolkestein-Bashing: Trade Liberalization under Segmented Labor Markets," IDEI Working Papers 353, Institut d'Économie Industrielle (IDEI), Toulouse.
   • Saint-Paul, Gilles, 2007. "Making Sense of Bolkestein-Bashing: Trade Liberalization under Segmented Labor Markets," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
   • Saint-Paul, Gilles, 2005. "Making Sense of Bolkestein-Bashing: Trade Liberalization under Segmented Labor Markets," IZA Discussion Papers 1618, Institute for the Study of Labor (IZA).
8. Rossana Patrón, 2000. "Effects from trade with heterogeneous workers and minimum wages: numerical exercises," Documentos de Trabajo (working papers) 1700, Department of Economics - dECON.
9. Davidson, Carl & Matusz, Steven J. & Nelson, Douglas R., 2007. "Can compensation save free trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 167-186, March.
10. Magee, Christopher, 2003. "Endogenous tariffs and trade adjustment assistance," Journal of International Economics, Elsevier, vol. 60(1), pages 203-222, May.
11. Gray, David, 1996. "How unemployable are displaced manufacturing workers?: An analysis of adjustment costs and supplemental adjustment assistance benefits in France," European Journal of Political Economy, Elsevier, vol. 12(4), pages 685-708, December.
12. Kletzer, Lori, 2003. "Trade-related Job Loss and Wage Insurance: A Synthetic Review," Santa Cruz Department of Economics, Working Paper Series qt27w182ht, Department of Economics, UC Santa Cruz.

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