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Optimal trade policy, equilibrium unemployment, and labor market inefficiency

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  • Wisarut Suwanprasert

Abstract

Under which circumstances is using trade policies to prevent job losses welfare improving? To answer this question, I incorporate a frictional labor market into the Heckscher–Ohlin model. The results suggest that (a) a country that has an inefficient level of unemployment may experience welfare losses from free trade; (b) having search‐generated unemployment is not sufficient to justify a use of trade policy, because free trade is still optimal when the labor market is constrained‐efficient; and (c) a small country that has an inefficient level of unemployment can use trade policy to improve its welfare.

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  • Wisarut Suwanprasert, 2020. "Optimal trade policy, equilibrium unemployment, and labor market inefficiency," Review of International Economics, Wiley Blackwell, vol. 28(5), pages 1232-1268, November.
    • Handle: RePEc:bla:reviec:v:28:y:2020:i:5:p:1232-1268
    DOI: 10.1111/roie.12492
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Optimal Trade Policy, Equilibrium Unemployment and Labor Market Inefficiency
      by Christian Zimmermann in NEP-DGE blog on 2016-05-13 18:00:31

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    Cited by:

    1. Andrew Jonelis & Wisarut Suwanprasert, 2022. "Protection for sale: evidence from around the world," Public Choice, Springer, vol. 191(1), pages 237-267, April.
    2. Tanapong Potipiti & Wisarut Suwanprasert, 2022. "Why does the WTO treat export subsidies and import tariffs differently?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(4), pages 1137-1172, November.
    3. Suwanprasert, Wisarut, 2017. "A note on “Jobs, Jobs, Jobs: A “New” Perspective on Protectionism” of Costinot (2009)," Economics Letters, Elsevier, vol. 157(C), pages 163-166.
    4. Tanapong Potipiti & Wisarut Suwanprasert, 2019. "Why Does the WTO Prohibit Export Subsidies But Not Import Tariffs?," PIER Discussion Papers 119, Puey Ungphakorn Institute for Economic Research.

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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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