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Jobs, Jobs, Jobs: A New Perspective on Protectionism

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  • Costenot, Arnaud
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    Abstract

    This paper analyzes the determinants of protectionism in a small open economy with search frictions a la PISSARIDES (2000). In equilibrium, jobs generate rents in each sector. Like in the Ricardo-Viner model, the magnitude of those rents may depend on the level of trade protection. The distinct feature of our model is that trade protection may also affect the access to those rents. By raising the domestic price of a given good, a government may attract more firms in a given industry. This raises the probability that a worker will find a job in this sector, and in turn, will benefit from the associated rents. Though simple, our model may help explain a variety of stylized facts regarding the structure of trade protection and individual trade-policy preferences.

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    Bibliographic Info

    Paper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt1bt8n04n.

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    Date of creation: 01 Jul 2006
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    Handle: RePEc:cdl:ucsdec:qt1bt8n04n

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    Keywords: search frictions; trade protection; trade-policy preferences;

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    1. Matschke, Xenia N. & Sherlund, Shane M, 2003. "Do Labor Issues Matter In The Determination Of U.S. Trade Policy? An Empirical Reevaluation," Santa Cruz Center for International Economics, Working Paper Series qt82k4x4f5, Center for International Economics, UC Santa Cruz.
    2. Grossman, Gene M & Shapiro, Carl, 1982. "A Theory of Factor Mobility," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 1054-69, October.
    3. Giovanni Maggi & Pinelopi Koujianou Goldberg, 1999. "Protection for Sale: An Empirical Investigation," American Economic Review, American Economic Association, vol. 89(5), pages 1135-1155, December.
    4. Bohara, Alok K & Kaempfer, William H, 1991. "A Test of Tariff Endogeneity in the United States," American Economic Review, American Economic Association, vol. 81(4), pages 952-60, September.
    5. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    6. K. H. O'Rourke & R. Sinnott, 2001. "The Determinants of Individual Trade Policy Preferences: International Survey Evidence," Trinity Economics Papers 200110, Trinity College Dublin, Department of Economics.
    7. Anderson, Kym, 1980. "The Political Market for Government Assistance to Australian Manufacturing Industries," The Economic Record, The Economic Society of Australia, vol. 56(153), pages 132-44, June.
    8. Hansen, John Mark, 1990. "Taxation and the political economy of the tariff," International Organization, Cambridge University Press, vol. 44(04), pages 527-551, September.
    9. Scheve, Kenneth F. & Slaughter, Matthew J., 2001. "What determines individual trade-policy preferences?," Journal of International Economics, Elsevier, vol. 54(2), pages 267-292, August.
    10. J. Michael Finger & Ann Harrison, 1996. "The MFA Paradox: More Protection and More Trade?," NBER Chapters, in: The Political Economy of American Trade Policy, pages 197-260 National Bureau of Economic Research, Inc.
    11. Francisco Rodriguez & Dani Rodrik, 1999. "Trade Policy and Economic Growth: a Skeptic's Guide to the Cross-National Evidence," Working Papers 9912, Economic Research Forum, revised Apr 1999.
    12. Neal, Derek, 1995. "Industry-Specific Human Capital: Evidence from Displaced Workers," Journal of Labor Economics, University of Chicago Press, vol. 13(4), pages 653-77, October.
    13. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output Per Worker Than Others?," The Quarterly Journal of Economics, MIT Press, vol. 114(1), pages 83-116, February.
    14. Trefler, Daniel, 1993. "Trade Liberalization and the Theory of Endogenous Protection: An Econometric Study of U.S. Import Policy," Journal of Political Economy, University of Chicago Press, vol. 101(1), pages 138-60, February.
    15. Carl Davidson & Steven J. Matusz, 2004. "International Trade and Labor Markets: Theory, Evidence, and Policy Implications," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number itlm, December.
    16. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
    17. Rodrik, Dani, 1995. "Political economy of trade policy," Handbook of International Economics, in: G. M. Grossman & K. Rogoff (ed.), Handbook of International Economics, edition 1, volume 3, chapter 28, pages 1457-1494 Elsevier.
    18. Mansfield, Edward D. & Busch, Marc L., 1995. "The political economy of nontariff barriers: a cross-national analysis," International Organization, Cambridge University Press, vol. 49(04), pages 723-749, September.
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