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On the dynamics of trade reform

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  • Albuquerque, Rui
  • Rebelo, Sergio

Abstract

The empirical evidence on trade reforms suggests that these have a surprisingly small impact on the country's industrial configuration. This industrial structure inertia is difficult to rationalize in standard trade models. This paper develops a two-sector industry dynamics model in which industrial composition inertia arises naturally. The model is then used to study the consequences of different types of trade reforms (e.g. permanent, temporary, gradual, pre-announced) on investment, employment composition, and income distribution.
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  • Albuquerque, Rui & Rebelo, Sergio, 2000. "On the dynamics of trade reform," Journal of International Economics, Elsevier, vol. 51(1), pages 21-47, June.
    • Handle: RePEc:eee:inecon:v:51:y:2000:i:1:p:21-47
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    6. Caballero, Ricardo J., 1999. "Aggregate investment," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 12, pages 813-862, Elsevier.
    7. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
    8. Albuquerque, Rui & Rebelo, Sergio, 2000. "On the dynamics of trade reform," Journal of International Economics, Elsevier, vol. 51(1), pages 21-47, June.
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    Cited by:

    1. Richard Mash, 1999. "The Investment Response to Imperfectly Credible Trade Liberalisation with Endogenous Probability of Reversal," Economics Series Working Papers WPS/1998-13, University of Oxford, Department of Economics.
    2. Ramanarayanan, Ananth, 2017. "Imported inputs, irreversibility, and international trade dynamics," Journal of International Economics, Elsevier, vol. 104(C), pages 1-18.
    3. Mario Larch & Wolfgang Lechthaler, 2013. "Whom to send to Doha? The Short-sighted Ones!," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 16(4), pages 634-649, October.
    4. Owens, Raymond E. & Sarte, Pierre-Daniel, 2002. "Analyzing firm location decisions: is public intervention justified?," Journal of Public Economics, Elsevier, vol. 86(2), pages 223-242, November.
    5. Wacziarg, Romain & Wallack, Jessica Seddon, 2004. "Trade liberalization and intersectoral labor movements," Journal of International Economics, Elsevier, vol. 64(2), pages 411-439, December.
    6. Albuquerque, Rui & Rebelo, Sergio, 2000. "On the dynamics of trade reform," Journal of International Economics, Elsevier, vol. 51(1), pages 21-47, June.
    7. Mendoza, Enrique G. & Uribe, Martin, 2000. "Devaluation risk and the business-cycle implications of exchange-rate management," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 53(1), pages 239-296, December.
    8. Alvaro Forteza & Rossana Patrón, 2003. "Trade Liberalisation with Costly Adjustment," Journal of Applied Economics, Universidad del CEMA, vol. 6, pages 95-125, May.
    9. Albuquerque, Rui, 2003. "The composition of international capital flows: risk sharing through foreign direct investment," Journal of International Economics, Elsevier, vol. 61(2), pages 353-383, December.
    10. Alessandria, George & Delacroix, Alain, 2008. "Trade and the (dis)incentive to reform labor markets: The case of reform in the European Union," Journal of International Economics, Elsevier, vol. 75(1), pages 151-166, May.
    11. Nurmi, Satu, 2004. "Employment Dynamics and Openness to Trade in Finnish Manufacturing," Discussion Papers 956, The Research Institute of the Finnish Economy.
    12. Mario Larch & Wolfgang Lechthaler, 2011. "Why ‘Buy American’ is a bad idea but politicians still like it," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(3), pages 838-858, August.
    13. Robert Tatum, 2005. "Sustaining imperfectly credible trade liberalization: Do the rate of tariff reduction and the degree of labour mobility matter?," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 407-435.
    14. Eva de Francisco, 2005. "Limited Participation, Income Distribution and Capital Account Liberalization," Computing in Economics and Finance 2005 454, Society for Computational Economics.
    15. Greenaway, David & Gullstrand, Joakim & Kneller, Richard, 2008. "Surviving globalisation," Journal of International Economics, Elsevier, vol. 74(2), pages 264-277, March.
    16. J. Bradford Jensen & Andrew B Bernard, 2002. "The Deaths of Manufacturing Plants," Working Papers 02-15, Center for Economic Studies, U.S. Census Bureau.
    17. Agenor, Pierre-Richard, 2002. "Does globalization hurt the poor?," Policy Research Working Paper Series 2922, The World Bank.
    18. Eva de Francisco, 2005. "Limited Participation, Income Distribution and Capital-Account Liberalization: Working Paper 2005-02," Working Papers 16302, Congressional Budget Office.

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    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade

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