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Trade Liberalization and Trade Adjustment Assistance

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  • K.C. Fung
  • Robert W. Staiger

Abstract

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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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4847.

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Date of creation: Sep 1994
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Publication status: published as The New Transatlantic Economy, Canzoneri, M., W. Ethier and V. Grilli,eds., Cambridge: Cambridge University Press, 1996.
Handle: RePEc:nbr:nberwo:4847

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  1. Kyle Bagwell & Robert W. Staiger, 1988. "A Theory of Managed Trade," NBER Working Papers 2756, National Bureau of Economic Research, Inc.
  2. Michael Mussa, 1982. "Government Policy and the Adjustment Process," NBER Chapters, in: Import Competition and Response, pages 73-122 National Bureau of Economic Research, Inc.
  3. Abreu, Dilip, 1988. "On the Theory of Infinitely Repeated Games with Discounting," Econometrica, Econometric Society, Econometric Society, vol. 56(2), pages 383-96, March.
  4. J. Peter Neary, 1982. "Intersectoral Capital Mobility, Wage Stickiness, and the Case for Adjustment Assistance," NBER Chapters, in: Import Competition and Response, pages 39-72 National Bureau of Economic Research, Inc.
  5. Peter A. Diamond, 1982. "Protection, Trade Adjustment Assistance, and Income Distribution," NBER Chapters, in: Import Competition and Response, pages 123-150 National Bureau of Economic Research, Inc.
  6. Abreu, Dilip, 1986. "Extremal equilibria of oligopolistic supergames," Journal of Economic Theory, Elsevier, Elsevier, vol. 39(1), pages 191-225, June.
  7. Lapan, Harvey E, 1988. "The Optimal Tariff, Production Lags, and Time Consistency," American Economic Review, American Economic Association, American Economic Association, vol. 78(3), pages 395-401, June.
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Cited by:
  1. Furusawa, Taiji & Lai, Edwin L. -C., 1999. "Adjustment costs and gradual trade liberalization," Journal of International Economics, Elsevier, Elsevier, vol. 49(2), pages 333-361, December.
  2. Didier Laussel & Philippe Michel & Thierry Paul, 2004. "Intersectoral adjustment and unemployment in a two-country Ricardian model. Une approche par la méthode événementielle," Recherches économiques de Louvain, De Boeck Université, De Boeck Université, vol. 70(2), pages 169-192.
  3. Didier LAUSSEL & Philippe MICHEL & Thierry Paul, 2004. "Intersectoral adjustment and unemployment in a two-country Ricardian model," Discussion Papers (REL - Recherches Economiques de Louvain) 2004023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  4. Wilfred J. Ethier, 2002. "Unilateralism in a Multilateral World," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 112(479), pages 266-292, April.
  5. Nirvikar Singh, 2004. "The Impact of International Labor Standards: A Survey of Economic Theory," International Trade, EconWPA 0412007, EconWPA.
  6. G. Schwartz, 2000. "Non-Enforceability of Trade Treaties and the Most-Favored Nation Clause: A Game Theoretic Analysis of Investment Distortions," Princeton Economic Theory Papers, Economics Department, Princeton University 00s17, Economics Department, Princeton University.

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