Making sense of Bolkestein-bashing: Trade liberalization under segmented labor markets
Trade liberalization is often met with sharp opposition. Recent examples include the so-called ‘Bolkestein’ directive, which allows service providers from a given EU member to temporarily work in another member country. One way to view such a reform is that it simply widens the range of goods that are tradable. This kind of reform is analysed in a two-country Dornbusch-Fischer-Samuelson style model, where labour cannot relocate to another sector upon a non-expected increase in the range of goods that can be traded. The effect of liberalization on the terms of trade tend to favour the poorer country (the ‘East’), if (as assumed) the most sophisticated goods are tradable before reform. Second, under ex-post liberalization, there exists a class of workers in the West who are harmed because they face competition from Eastern workers and cannot relocate to other activities. But if the East’s economy is relatively small, their wage losses are not very large. Things are different, however, if there exist asymmetries in labour market institutions, such that upon reform, labour can relocate in the East but not in the West. Some workers in the West can then experience very large wage losses. Thus, rigid labour markets in the West magnify opposition to reform there.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Barro, Robert J & Gordon, David B, 1983.
"A Positive Theory of Monetary Policy in a Natural Rate Model,"
Journal of Political Economy,
University of Chicago Press, vol. 91(4), pages 589-610, August.
- Robert J. Barro & David B. Gordon, 1981. "A Positive Theory of Monetary Policy in a Natural-Rate Model," NBER Working Papers 0807, National Bureau of Economic Research, Inc.
- Furusawa, Taiji & Lai, Edwin L. -C., 1999. "Adjustment costs and gradual trade liberalization," Journal of International Economics, Elsevier, vol. 49(2), pages 333-361, December.
- Feenstra, Robert C. & Lewis, Tracy R., 1994.
"Trade adjustment assistance and Pareto gains from trade,"
Journal of International Economics,
Elsevier, vol. 36(3-4), pages 201-222, May.
- Feenstra, R.C. & Lewis, T.R., 1989. "Trade Adjustment Assistance And Pareto Gains From Trade," Papers 343, California Davis - Institute of Governmental Affairs.
- Robert C. Feenstra & Tracy R. Lewis, 1991. "Trade Adjustment Assistance and Pareto Gains From Trade," NBER Working Papers 3845, National Bureau of Economic Research, Inc.
- Paul A. Samuelson, 2004. "Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization," Journal of Economic Perspectives, American Economic Association, vol. 18(3), pages 135-146, Summer.
- Jagdish Bhagwati & Arvind Panagariya, 2004.
"The Muddles over Outsourcing,"
Journal of Economic Perspectives,
American Economic Association, vol. 18(4), pages 93-114, Fall.
- Staiger, Robert W & Tabellini, Guido, 1987. "Discretionary Trade Policy and Excessive Protection," American Economic Review, American Economic Association, vol. 77(5), pages 823-837, December.
- Itoh, Motoshige & Kiyono, Kazuharu, 1987. "Welfare-Enhancing Export Subsidies," Journal of Political Economy, University of Chicago Press, vol. 95(1), pages 115-137, February.
- James A. Brander & Barbara J. Spencer, 1989.
"Trade Adjustment Assistance: Welfare and Incentive Effects of Payments to Displaced Workers,"
NBER Working Papers
3071, National Bureau of Economic Research, Inc.
- Brander, James A. & Spencer, Barbara J., 1994. "Trade adjustment assistance : Welfare and incentive effects of payments to displaced workers," Journal of International Economics, Elsevier, vol. 36(3-4), pages 239-261, May.
- Grossman, Gene M., 1983. "Partially mobile capital : A general approach to two-sector trade theory," Journal of International Economics, Elsevier, vol. 15(1-2), pages 1-17, August.
- 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.
- Brecher, Richard A. & Choudhri, Ehsan U., 1994.
"Pareto gains from trade, reconsidered : Compensating for jobs lost,"
Journal of International Economics,
Elsevier, vol. 36(3-4), pages 223-238, May.
- Richard Brecher & Eshan Choudhri, 1991. "Pareto Gains from Trade, Reconsidered: Compensating for Job Lost," Carleton Economic Papers 91-16, Carleton University, Department of Economics, revised May 1994.
- Dornbusch, Rudiger & Fischer, Stanley & Samuelson, Paul A, 1977.
"Comparative Advantage, Trade, and Payments in a Ricardian Model with a Continuum of Goods,"
American Economic Review,
American Economic Association, vol. 67(5), pages 823-839, December.
- R. Dornbusch & S. Fischer & P. A. Samuelson, 1976. "Comparative Advantage, Trade and Payments in a Ricardian Model With a Continuum of Goods," Working papers 178, Massachusetts Institute of Technology (MIT), Department of Economics.
- Kydland, Finn E & Prescott, Edward C, 1977. "Rules Rather Than Discretion: The Inconsistency of Optimal Plans," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 473-491, June.
- Gersbach, Hans & Schniewind, Achim, 2005.
"Awareness of General Equilibrium Effects and Unemployment,"
CEPR Discussion Papers
5012, C.E.P.R. Discussion Papers.
- Gersbach, Hans & Schniewind, Achim, 2001. "Awareness of General Equilibrium Effects and Unemployment," IZA Discussion Papers 394, Institute for the Study of Labor (IZA).
When requesting a correction, please mention this item's handle: RePEc:eee:inecon:v:73:y:2007:i:1:p:152-174. 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: (Shamier, Wendy)
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.