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Trade adjustment assistance : Welfare and incentive effects of payments to displaced workers

  • Brander, James A.
  • Spencer, Barbara J.

We analyze the welfare effects of conditional trade adjustment assistance (i.e. assistance that is received only if displaced workers remain unemployed), and compare the conditional program with unconditional assistance. Taking the level of assistance as exogenous, we show that either the conditional or unconditional program may impose greater efficiency costs, depending on underlying parameters. We then introduce an explicit social welfare function and solve for the optimal level of assistance for each program. Finally, we compare the optimized values of the two programs. If the distribution of wage offers is uniform, the unconditional program is welfare superior.

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File URL: http://www.sciencedirect.com/science/article/B6V6D-458XN1R-2Y/2/dec7bd7d6faedb31a3d7540068332a81
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Article provided by Elsevier in its journal Journal of International Economics.

Volume (Year): 36 (1994)
Issue (Month): 3-4 (May)
Pages: 239-261

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Handle: RePEc:eee:inecon:v:36:y:1994:i:3-4:p:239-261
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505552

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  1. Blau, David M. & Robins, Philip K., 1986. "Job search, wage offers, and unemployment insurance," Journal of Public Economics, Elsevier, vol. 29(2), pages 173-197, March.
  2. Clarete, Ramon L. & Whalley, John, 1987. "Comparing the marginal welfare costs of commodity and trade taxes," Journal of Public Economics, Elsevier, vol. 33(3), pages 357-362, August.
  3. Stuart, Charles E, 1984. "Welfare Costs per Dollar of Additional Tax Revenue in the United States," American Economic Review, American Economic Association, vol. 74(3), pages 352-62, June.
  4. Martin Feldstein & James M. Poterba, 1984. "Unemployment Insurance and Reservation Wages," NBER Working Papers 1011, National Bureau of Economic Research, Inc.
  5. Ballard, Charles L & Shoven, John B & Whalley, John, 1985. "General Equilibrium Computations of the Marginal Welfare Costs of Taxes in the United States," American Economic Review, American Economic Association, vol. 75(1), pages 128-38, March.
  6. Bhagwati, Jagdish N. & Brecher, Richard A. & Srinivasan, T. N., 1984. "DUP activities and economic theory," European Economic Review, Elsevier, vol. 24(3), pages 291-307, April.
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