We explore the relationship between trade adjustment subsidies and successful reciprocal trade liberalization. We consider economies that are faced with a periodic need to move resources out of a declining import-competing sector, and that are attempting to sustain cooperative but self-enforcing trade agreements in the face of these adjustment needs. If the limitations associated with enforcement of international trade agreements are sufficiently severe, trade adjustment assistance can facilitate reciprocal trade liberalization. We argue that this suggests a possible efficiency rationale for adjustment policies that treat resources differently when traded sectors are involved.
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number
4847.
Length: Date of creation: Sep 1994 Date of revision: Handle: RePEc:nbr:nberwo:4847
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Find related papers by JEL classification: F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
References listed on IDEAS 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.:
Bagwell, Kyle & Staiger, Robert W, 1990.
"A Theory of Managed Trade,"
American Economic Review,
American Economic Association, vol. 80(4), pages 779-95, September.
[Downloadable!] (restricted)
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Kyle Bagwell & Robert W. Staiger, 1989.
"A Theory of Managed Trade,"
Discussion Papers
801, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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