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Trade adjustment assistance : Welfare and incentive effects of payments to displaced workers

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  • Brander, James A.
  • Spencer, Barbara J.

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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Bibliographic Info

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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References

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  1. Martin Feldstein & James M. Poterba, 1984. "Unemployment Insurance and Reservation Wages," NBER Working Papers 1011, National Bureau of Economic Research, Inc.
  2. 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.
  3. 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.
  4. 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.
  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. 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.
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Citations

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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.
  2. 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.
  3. James Lake & Daniel L. Millimet, 2014. "An Empirical Analysis of Trade-Related Redistribution and the Political Viability of Free Trade," Departmental Working Papers 1405, Southern Methodist University, Department of Economics.
  4. Ethier, Wilfred J., 2001. "Theoretical problems in negotiating trade liberalization," European Journal of Political Economy, Elsevier, vol. 17(2), pages 209-232, June.
  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).
  6. 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.
  7. 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.
  8. Carl Davidson & Steven Matusz, 2005. "Trade Liberalization and Compensation," International Trade 0503008, EconWPA.
  9. Robert C. Feenstra & Tracy R. Lewis & John McMillan, 1990. "Designing Policies to Open Trade," NBER Working Papers 3258, National Bureau of Economic Research, Inc.
  10. Magee, Christopher, 2003. "Endogenous tariffs and trade adjustment assistance," Journal of International Economics, Elsevier, vol. 60(1), pages 203-222, May.
  11. 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.
  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.
  13. Rossana PatrĂ³n, 2000. "Effects from trade with heterogeneous workers and minimum wages: numerical exercises," Documentos de Trabajo (working papers) 1700, Department of Economics - dECON.

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