Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis
AbstractTrade liberalization is no Pareto-improvement - there are winners (high-skilled) and losers (low-skilled). To compensate the losers the government is assumed to introduce unemployment benefits (UB). These benefits are financed by either a wage tax, a payroll tax, or a profit tax. Using a Melitz-type model of international trade with unionized labor markets and heterogeneous workers we show that: (i) there is a threshold level of UB where all trade gains are destroyed, (ii) this threshold differs between different kind of taxes, (iii) there is a clearcut ranking in terms of welfare for the chosen funding of the UB: 1. wage tax, 2. profit tax, 3. Payroll tax.
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Bibliographic InfoPaper provided by FIW in its series FIW Working Paper series with number 092.
Date of creation: May 2012
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Find related papers by JEL classification:
- F1 - International Economics - - Trade
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- H2 - Public Economics - - Taxation, Subsidies, and Revenue
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-05-29 (All new papers)
- NEP-INT-2012-05-29 (International Trade)
- NEP-LAB-2012-05-29 (Labour Economics)
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Blog mentionsAs found by EconAcademics.org, the blog aggregator for Economics research:
- Using unemployment insurance to compensate for losses from opening trade
by Economic Logician in Economic Logic on 2012-06-15 14:14:00
by himaginary in himaginaryの日記 on 2012-06-20 07:00:00
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