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Employment Risk and Optimal Trade Policies

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  • Choi, E. Kwan
  • Beladi, Hamid
  • Chen, Jiong

Abstract

This paper considers trade policies and welfare in a Harris-Todaro model with risk averse workers. Workers are assumed to have identical and homothetic preferences, but their incomes differ, depending on whether and where they are employed. When workers are equally valued, maximizing social utility is equivalent to maximizing the utility of a rural worker. An optimal policy consists of a production subsidy on the exportable and an import tariff. This model explains the widespread use of import tariffs on manufactured goods along with production subsidies on the export sectors in many LDCs.

Suggested Citation

  • Choi, E. Kwan & Beladi, Hamid & Chen, Jiong, 2001. "Employment Risk and Optimal Trade Policies," Staff General Research Papers Archive 5145, Iowa State University, Department of Economics.
    • Handle: RePEc:isu:genres:5145
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    References listed on IDEAS

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    1. Murray C. Kemp, 1968. "Some Issues In The Analysis Of Trade Gains," Oxford Economic Papers, Oxford University Press, vol. 20(2), pages 149-161.
    2. Bhagwati, Jagdish N & Srinivasan, T N, 1974. "On Reanalyzing the Harris-Todaro Model: Policy Rankings in the Case of Sector-Specific Sticky Wages," American Economic Review, American Economic Association, vol. 64(3), pages 502-508, June.
    3. Marjit, Sugata, 1991. "Agro-based industry and rural-urban migration : A case for an urban employment subsidy," Journal of Development Economics, Elsevier, vol. 35(2), pages 393-398, April.
    4. Hazari, Bharat R. & Sgro, Pasquale M., 1991. "Urban-rural structural adjustment, urban unemployment with traded and non-traded goods," Journal of Development Economics, Elsevier, vol. 35(1), pages 187-196, January.
    5. Batra, Raveendra N & Beladi, Hamid, 1990. "Pattern of Trade between Underemployed Economies," Economica, London School of Economics and Political Science, vol. 57(228), pages 485-493, November.
    6. Chen, Jiong & Choi, E. Kwan, 1994. "Trade Policies and Welfare in a Harris-Todaro Economy," Staff General Research Papers Archive 879, Iowa State University, Department of Economics.
    7. Choi, E Kwan & Beladi, Hamid, 1993. "Optimal Trade Policies for a Small Open Economy," Economica, London School of Economics and Political Science, vol. 60(240), pages 475-486, November.
    8. Batra, Raveendra N. & Seth, Avinash C., 1977. "Unemployment, tariffs and the theory of international trade," Journal of International Economics, Elsevier, vol. 7(3), pages 295-306, August.
    9. Harris, John R & Todaro, Michael P, 1970. "Migration, Unemployment & Development: A Two-Sector Analysis," American Economic Review, American Economic Association, vol. 60(1), pages 126-142, March.
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    Cited by:

    1. Adrian BANARESCU & Aurel-Mihail BALOI, 2015. "Preventing and Detecting Fraud through Data Analytics in auto insurance field," Romanian Journal of Economics, Institute of National Economy, vol. 40(1(49)), pages 89-114, june.
    2. repec:ine:journl:v:40:y:2015:i:49:p:63-88 is not listed on IDEAS

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    More about this item

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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