IDEAS home Printed from https://ideas.repec.org/p/red/sed017/1617.html
   My bibliography  Save this paper

Trade Liberalization Versus Protectionism: Are the Dynamic Welfare Implications Symmetric?

Author

Listed:
  • Michael Sposi

    (Federal Reserve Bank of Dallas)

  • Ana Maria Santacreu

    (St. Louis Fed)

Abstract

We quantify changes in welfare that result from alternative trade reforms in an economy with endogenous capital accumulation. The dynamic welfare gains associated with a particular reduction in trade frictions are larger than the dynamic welfare losses associated with returning to the initial level of the frictions. This ``asymmetry'' occurs in the short-run, yet, permanently affects welfare. Three channels contribute to the size of the asymmetry: (i) the rate of capital depreciation, (ii) the responses of measured TFP and the marginal efficiency of investment to the trade shock, and (iii) the optimal response of the investment rate. Absent transitional dynamics, the gains from a trade liberalization are equal to the losses from returning to the initial trade frictions. The short-run asymmetries imply that the sequencing of trade reforms matters for welfare.

Suggested Citation

  • Michael Sposi & Ana Maria Santacreu, 2017. "Trade Liberalization Versus Protectionism: Are the Dynamic Welfare Implications Symmetric?," 2017 Meeting Papers 1617, Society for Economic Dynamics.
    • Handle: RePEc:red:sed017:1617
    as

    Download full text from publisher

    File URL: https://red-files-public.s3.amazonaws.com/meetpapers/2017/paper_1617.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
    2. Costas Arkolakis & Arnaud Costinot & Andres Rodriguez-Clare, 2012. "New Trade Models, Same Old Gains?," American Economic Review, American Economic Association, vol. 102(1), pages 94-130, February.
    3. M. Affendy, Arip & Sim Yee, Lau & Satoru, Madono, 2010. "Commodity-industry classificationproxy: A correspondence table between SITC revision 2 and ISIC revision 3," MPRA Paper 27626, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ravikumar, B. & Santacreu, Ana Maria & Sposi, Michael, 2019. "Capital accumulation and dynamic gains from trade," Journal of International Economics, Elsevier, vol. 119(C), pages 93-110.
    2. Piyusha Mutreja & Michael Sposi & B. Ravikumar, 2018. "Capital Goods Trade, Relative Prices and Economic Development," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 27, pages 101-122, January.
    3. French, Scott, 2016. "The composition of trade flows and the aggregate effects of trade barriers," Journal of International Economics, Elsevier, vol. 98(C), pages 114-137.
    4. Pierre Bachas & Matthew Fisher-Post & Anders Jensen & Gabriel Zucman, 2022. "Globalization and Factor Income Taxation," Working Papers halshs-03693211, HAL.
    5. Waugh, Michael E. & Ravikumar, B., 2016. "Measuring openness to trade," Journal of Economic Dynamics and Control, Elsevier, vol. 72(C), pages 29-41.
    6. Piyusha Mutreja & B. Ravikumar & Raymond Riezman & Michael Sposi, 2015. "Price Equalization Does Not Imply Free Trade," Review, Federal Reserve Bank of St. Louis, vol. 97(4), pages 323-339.
    7. Scott French, 2014. "Innovation, Product-Cycle Trade, and the Cross-Country Distribution of Income," Discussion Papers 2014-26, School of Economics, The University of New South Wales.
    8. Sposi, Michael, 2015. "Trade barriers and the relative price of tradables," Journal of International Economics, Elsevier, vol. 96(2), pages 398-411.
    9. Ariel Burstein & Javier Cravino & Jonathan Vogel, 2013. "Importing Skill-Biased Technology," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 32-71, April.
    10. Michael Sposi & Ana Maria Santacreu & B Ravikumar, 2016. "Capital Accumulation and Welfare Gains from Trade," 2016 Meeting Papers 1637, Society for Economic Dynamics.
    11. Mike Waugh & B Ravikumar, 2016. "Trade Potential: A New Measure of Openness," 2016 Meeting Papers 1329, Society for Economic Dynamics.
    12. Robert Zymek & Alejandro Cunat, 2017. "International Value-Added Linkages in Development Accounting," 2017 Meeting Papers 1136, Society for Economic Dynamics.
    13. Piyusha Mutreja & B. Ravikumar & Michael Sposi, 2014. "Capital goods trade and economic development," Globalization Institute Working Papers 183, Federal Reserve Bank of Dallas.
    14. Clemens Struck & Adnan Velic, 2016. "Competing Gains From Trade," Trinity Economics Papers tep1116, Trinity College Dublin, Department of Economics, revised Apr 2018.
    15. Mutreja, Piyusha & Ravikumar, B. & Riezman, Raymond & Sposi, Michael, 2014. "Price equalization, trade flows, and barriers to trade," European Economic Review, Elsevier, vol. 70(C), pages 383-398.
    16. Heerman, Kari E.R., 2020. "Technology, ecology and agricultural trade," Journal of International Economics, Elsevier, vol. 123(C).
    17. Heerman, Kari E. & Sheldon, Ian M., 2018. "Increased economic integration in the Asia-Pacific Region: What might be the potential impact on agricultural trade?," 2018 Annual Meeting, August 5-7, Washington, D.C. 274279, Agricultural and Applied Economics Association.
    18. Raphael Bergoeing & Norman V. Loayza & Facundo Piguillem, 2016. "The Whole is Greater than the Sum of Its Parts: Complementary Reforms to Address Microeconomic Distortions," The World Bank Economic Review, World Bank, vol. 30(2), pages 268-305.
    19. Arcalean, Calin & Glomm, Gerhard & Schiopu, Ioana, 2012. "Growth effects of spatial redistribution policies," Journal of Economic Dynamics and Control, Elsevier, vol. 36(7), pages 988-1008.
    20. Jules Hugot & Camilo Umana Dajud, 2016. "Trade costs and the Suez and Panama Canals," Working Papers 2016-29, CEPII research center.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:red:sed017:1617. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Zimmermann (email available below). General contact details of provider: https://edirc.repec.org/data/sedddea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.