Labour Adjustment and Gradual Reform: Is Commitment Important?
AbstractWe analyse a model in which a government uses a second-best policy to affect the reallocation of labour, following a change in relative prices. We consider two extreme cases, in which the government has either unlimited or negligible ability to commit to future actions. We explain why the ability to make commitments may be unimportant, and we illustrate this conjecture with numerical examples. For either assumption about commitment ability, the equilibrium policy involves gradual liberalization. The dying sector is protected during the transition to a free market, in order to decrease the amount of unemployment. Our results are sensitive to the assumptions about migration.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1094.
Date of creation: Jan 1995
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Other versions of this item:
- Karp, Larry & Paul, Thierry, 1994. "Labor Adjustment and Gradual Reform:Is Commitment Important?," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7gc7t3nm, Department of Agricultural & Resource Economics, UC Berkeley.
- Karp, Larry S. & Paul, Thierry, 1994. "Labor Adjustment And Gradual Reform: Is Commitment Important?," Working Papers 51222, International Agricultural Trade Research Consortium.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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