Phasing in and Phasing Out Protectionism with Costly Adjustment of Labour
AbstractWe study the dynamics of optimal trade policy in a model with costly inter-sectoral adjustment of labour, where migrants pay less than the marginal social cost of migration. If workers have rational expectations, a future tariff has an announcement effect on the current migration decision. If the government is able to commit itself to future policy, the optimal trajectory involves phasing in and then phasing out protection of the dying sector. This contrasts with recommendations of gradual liberalization. Without the ability to make commitments, the equilibrium policy begins with and maintains free trade.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 856.
Date of creation: Dec 1993
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- Karp, Larry & Paul, Thierry, 1994. "Phasing In and Phasing Out Protectionism with Costly Adjustment of Labour," Economic Journal, Royal Economic Society, vol. 104(427), pages 1379-92, November.
- Karp, Larry S. & Paul, Thierry, 1993. "Phasing In And Phasing Out Protectionism With Costly Adjustments Of Labour," Working Papers 51112, 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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