Phasing In And Phasing Out Protectionism With Costly Adjustments Of Labour
We study the dynamics of optimal trade policy in a model with costly inter-sectoral adjustment of labour, where migrants pay less than the marginal social cost of migration. If workers have rational expectations, a future tariff has an announcement effect on the current migration decision. If the government is able to commit itself to future policy, the optimal trajectory involves phasing in and then phasing out protection of the dying sector. This contrasts with recommendations of gradual liberalization. Without the ability to make commitments, the equilibrium policy begins with and maintains free trade.
Other versions of this item:
- Karp, Larry & Paul, Thierry, 1994. "Phasing In and Phasing Out Protectionism with Costly Adjustment of Labour," Economic Journal, Royal Economic Society, vol. 104(427), pages 1379-1392, November.
- 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.
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- J20 - Labor and Demographic Economics - - Demand and Supply of Labor - - - General
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
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