Trade Adjustment Assistance and Pareto Gains From Trade
AbstractIn a model where all factors of production are imperfectly mobile, we argue that the Dixit-Norman scheme of commodity taxes may not lead to strict Pareto gains from trade. Rather, this scheme must be augmented by policies which give factors an incentive to move: hence, the role for trade adjustment assistance (TAA). We demonstrate that by knowledge of the distribution of adjustment costs across individuals, the government can offer a single TAA subsidy to all individuals willing to move between industries, and maintain a non-negative budget. The TAA subsidy, combined with the Dixit-Norman pattern of commodity taxes, can lead to Pareto gains from trade under the conditions we identify.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 3845.
Date of creation: Sep 1991
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Other versions of this item:
- Feenstra, Robert C. & Lewis, Tracy R., 1994. "Trade adjustment assistance and Pareto gains from trade," Journal of International Economics, Elsevier, vol. 36(3-4), pages 201-222, May.
- Feenstra, R.C. & Lewis, T.R., 1989. "Trade Adjustment Assistance And Pareto Gains From Trade," Papers 343, California Davis - Institute of Governmental Affairs.
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