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Sustaining imperfectly credible trade liberalization: Do the rate of tariff reduction and the degree of labour mobility matter?

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  • Robert Tatum

Abstract

Imperfectly credible trade liberalization can lead to balance of payment deterioration and a subsequent reversal of the reform. Therefore, this paper examines whether the likelihood of policy reversal depends on the rate of tariff reduction or the degree of labour mobility. The analysis shows that transitory unemployment increases the likelihood of policy reversal. Furthermore, a gradual reduction in the tariff rate is found to extend the life of the liberalization episode, but does not necessarily increase the likelihood of sustained liberalization.

Suggested Citation

  • 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.
    • Handle: RePEc:taf:jitecd:v:14:y:2005:i:4:p:407-435
    DOI: 10.1080/09638190500372503
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    More about this item

    Keywords

    Liberalization; credibility; unemployment; payments deficits;
    All these keywords.

    JEL classification:

    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance

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