Trade Liberalisation with Costly Adjustment
The paper analyses the efficiency and the distributional effects of eliminating a tariff in a protected sector, in a Heckscher-Ohlin model of trade with costs of adjustment. The tariff can be eliminated at the onset or after a while. In case of postponing it the government may pre-announce the policy change or may not do it and surprise the private sector. It is shown that while large adjustment costs reduce the efficiency gains from trade liberalisation, small to moderate adjustment costs may raise the efficiency gains from a pre-announced liberalisation. The adjustment costs reduce the effects on factor returns from a sudden unanticipated liberalisation. The distributional effects of trade liberalisations are more complex when the policy is pre-announced. For small and moderate levels, the adjustment costs may increase the effects of the policy on factor returns. Also, the “value of the announcement” rises with the adjustment costs.
Volume (Year): VI (2003)
Issue (Month): (May)
|Contact details of provider:|| Postal: |
Phone: (5411) 6314-3000
Fax: (5411) 4314-1654
Web page: http://www.cema.edu.ar/publicaciones/jae.html
More information through EDIRC
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.:
- Sargent, Thomas J, 1978.
"Estimation of Dynamic Labor Demand Schedules under Rational Expectations,"
Journal of Political Economy,
University of Chicago Press, vol. 86(6), pages 1009-44, December.
- Thomas J. Sargent, 1978. "Estimation of dynamic labor demand schedules under rational expectations," Staff Report 27, Federal Reserve Bank of Minneapolis.
- Guillermo Calvo & Enrique G. Mendoza, 1994.
"Trade Reforms of Uncertain Duration and Real Uncertainty; A First Approximation,"
IMF Working Papers
94/45, International Monetary Fund.
- Guillermo A. Calvo & Enrique G. Mendoza, 1994. "Trade Reforms of Uncertain Duration and Real Uncertainty: A First Approximation," IMF Staff Papers, Palgrave Macmillan, vol. 41(4), pages 555-586, December.
- Rui Albuquerque & Sergio Rebelo, 1998.
"On the Dynamics of Trade Reform,"
NBER Working Papers
6700, National Bureau of Economic Research, Inc.
- Hamermesh, Daniel S, 1995. "Labour Demand and the," Economic Journal, Royal Economic Society, vol. 105(430), pages 620-34, May.
- Karp, Larry & Paul, Thierry, 1994.
"Phasing In and Phasing Out Protectionism with Costly Adjustment of Labour,"
Royal Economic Society, vol. 104(427), pages 1379-92, November.
- Karp, Larry S. & Paul, Thierry, 1993. "Phasing In And Phasing Out Protectionism With Costly Adjustments Of Labour," Working Papers 51112, International Agricultural Trade Research Consortium.
- Karp, Larry & Paul, Thierry, 1993. "Phasing in and Phasing Out Protectionism with Costly Adjustment of Labour," CEPR Discussion Papers 856, C.E.P.R. Discussion Papers.
- Daniel S. Hamermesh & Wolter H. J. Hassink & Jan C. van Ours, 1994. "New Facts About Factor-Demand Dynamics: Employment, Jobs, and Workers," NBER Working Papers 4625, National Bureau of Economic Research, Inc.
- Daron Acemoglu, 2003.
"Patterns of Skill Premia,"
Review of Economic Studies,
Wiley Blackwell, vol. 70(2), pages 199-230, 04.
- Sebastian Edwards, 1994. "Trade and Industrial Policy Reform in Latin America," NBER Working Papers 4772, National Bureau of Economic Research, Inc.
- Ramon L. Clarete & Irene Trela & John Whalley, 1994. "Evaluating Labour Adjustment Costs from Trade Shocks: Illustrations for the U.S. Economy Using an Applied General Equilibrium Model With Transactions," NBER Working Papers 4628, National Bureau of Economic Research, Inc.
- Leamer, Edward E., 1980. "Welfare computations and the optimal staging of tariff reductions in models with adjustment costs," Journal of International Economics, Elsevier, vol. 10(1), pages 21-36, February.
- Edwards, Sebastian, 1988. "Terms of Trade, Tariffs, and Labor Market Adjustment in Developing Countries," World Bank Economic Review, World Bank Group, vol. 2(2), pages 165-85, May.
- Falvey, Rod & Kim, Cha Dong, 1992. "Timing and Sequencing Issues in Trade Liberalisation," Economic Journal, Royal Economic Society, vol. 102(413), pages 908-24, July.
- Avinash Dixit, 1992. "Investment and Hysteresis," Journal of Economic Perspectives, American Economic Association, vol. 6(1), pages 107-132, Winter.
- Rothschild, Michael, 1971. "On the Cost of Adjustment," The Quarterly Journal of Economics, MIT Press, vol. 85(4), pages 605-22, November.
When requesting a correction, please mention this item's handle: RePEc:cem:jaecon:v:6:y:2003:n:1:p:95-125. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valeria Dowding)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.