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Trade Adjustment Assistance: Welfare and Incentive Effects of Payments to Displaced Workers

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James A. Brander
Barbara J. Spencer

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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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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3071.

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Date of creation: Aug 1989
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Handle: RePEc:nbr:nberwo:3071

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. 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. [Downloadable!] (restricted)
  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. [Downloadable!] (restricted)
  3. 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. [Downloadable!] (restricted)
  4. Feldstein, Martin & Poterba, James, 1984. "Unemployment insurance and reservation wages," Journal of Public Economics, Elsevier, vol. 23(1-2), pages 141-167. [Downloadable!] (restricted)
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  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. [Downloadable!] (restricted)
  6. 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. [Downloadable!] (restricted)
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  1. Hanson, Kenneth & Burfisher, Mary E. & Hopkins, Jeffrey & Somwaru, Agapi, 2004. "Global Agricultural Reform And U.S. Agricultural Adjustment Capacity," 2004 Annual meeting, August 1-4, Denver, CO 20348, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). [Downloadable!]
  2. 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. [Downloadable!] (restricted)
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  3. Wilfred J. Ethier, . "Punishment and Dispute Settlement in Trade Agreements," EPRU Working Paper Series 01-14, Economic Policy Research Unit (EPRU), University of Copenhagen. Department of Economics. [Downloadable!]
  4. Rossana Patrón, 2000. "Effects from trade with heterogeneous workers and minimum wages: numerical exercises," Documentos de Trabajo (working papers) 1700, Department of Economics - dECON. [Downloadable!]
  5. Carl Davidson & Steven Matusz, 2005. "Trade Liberalization and Compensation," International Trade 0503008, EconWPA. [Downloadable!]
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  6. Burfisher, Mary E. & Hanson, Kenneth & Hopkins, Jeffrey & 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). [Downloadable!]
  7. Robert C. Feenstra & Tracy R. Lewis & John McMillan, 1990. "Designing Policies to Open Trade," NBER Working Papers 3258, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Lori Kletzer, 2003. "Trade-related Job Loss and Wage Insurance: A Synthetic Review," Santa Cruz Center for International Economics, Working Paper Series 1026, Center for International Economics, UC Santa Cruz. [Downloadable!]
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