IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Preferential Trade Agreements and the Labor Market

  • Ornelas, Emanuel

Labor market consequences are at the forefront of most debates on the merits of trade liberalization. Preferential trade agreements (PTAs) have become the primary form of trade liberalization in most countries, and several studies have shown that discriminatory and non-discriminatory trade liberalization can lead to very different outcomes. Yet to date there has not been any attempt to study the specific labor market implications of preferential liberalization. In this article I argue that the labor market consequences of unilateral or multilateral non-discriminatory trade liberalization and those stemming from integration in the context of PTAs can indeed be quite distinct, and therefore the latter must be given closer scrutiny. I provide a short summary of both the theoretical literature on trade and the labor market and the literature on preferential liberalization. Relying on the insights from those two—largely independent—lines of research, I then discuss why liberalization through PTAs can have consequences for the labor market that are considerably different from the effects of lowering trade barriers in a non-discriminatory fashion. Examples of areas where those differences are likely to be meaningful include the nature of labor market adjustment costs, the incentives for firms to start exporting, and the effects on “job rents.”

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.

File URL: http://www.cepr.org/active/publications/discussion_papers/dp.php?dpno=8805
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

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.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8805.

as
in new window

Length:
Date of creation: Jan 2012
Date of revision:
Handle: RePEc:cpr:ceprdp:8805
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


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.:

as in new window
  1. Smith, Alasdair, 1998. " Comment on J. P. Neary, "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries."," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 207-09, March.
  2. Ben Zissimos, 2006. "The GATT and Gradualism," Vanderbilt University Department of Economics Working Papers 0619, Vanderbilt University Department of Economics.
  3. Sang-Seung, Yi, 1996. "Endogenous formation of customs unions under imperfect competition: open regionalism is good," Journal of International Economics, Elsevier, vol. 41(1-2), pages 153-177, August.
  4. Caroline Freund & Emanuel Ornelas, 2009. "Regional Trade Agreements," CEP Discussion Papers dp0961, Centre for Economic Performance, LSE.
  5. Carl Davidson & Fredrik Heyman & Steven Matusz, & Fredrik Sjoholm & Susan Zhu, . "Globalization and Imperfect Labor Market Sorting," Discussion Papers 10/30, University of Nottingham, GEP.
  6. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Inequality and Unemployment in a Global Economy," Econometrica, Econometric Society, vol. 78(4), pages 1239-1283, 07.
  7. Marc J. Melitz, 2003. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," Econometrica, Econometric Society, vol. 71(6), pages 1695-1725, November.
  8. Pravin Krishna, . "Regionalism and Multilaterialism: A Political Economy Approach," Working Papers 96-5, Brown University, Department of Economics.
  9. Ornelas, Emanuel, 2005. "Endogenous free trade agreements and the multilateral trading system," Journal of International Economics, Elsevier, vol. 67(2), pages 471-497, December.
  10. Levy, Philip I., 1999. "Lobbying and international cooperation in tariff setting," Journal of International Economics, Elsevier, vol. 47(2), pages 345-370, April.
  11. Lawless, Martina, 2011. "Marginal Distance: Does Export Experience Reduce Firm Trade Costs?," Research Technical Papers 2/RT/11, Central Bank of Ireland.
  12. Chang, Won & Winters, L. Alan, 1999. "How Regional Blocs Affect Excluded Countries: The Price Effects of MERCOSUR," CEPR Discussion Papers 2179, C.E.P.R. Discussion Papers.
  13. Arvind Panagariya & Jagdish Bhagwati, 1996. "The Economics of Preferential Trade Agreements," Books, American Enterprise Institute, number 51856, 2.
  14. Facundo Albornoz & Héctor Calvo-Pardo & Gregory Corcos & Emanuel Ornelas, 2010. "Sequential exporting," LSE Research Online Documents on Economics 28724, London School of Economics and Political Science, LSE Library.
  15. Costinot, Arnaud, 2008. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," University of California at San Diego, Economics Working Paper Series qt1cp9749b, Department of Economics, UC San Diego.
  16. Ben Zissimos, 2011. "Why are Trade Agreements Regional?," Review of International Economics, Wiley Blackwell, vol. 19(1), pages 32-45, 02.
  17. Karacaovali, Baybars & Limão, Nuno, 2005. "The Clash of Liberalizations: Preferential vs. Multilateral Trade Liberalization in the European Union," CEPR Discussion Papers 4973, C.E.P.R. Discussion Papers.
  18. Yi, Sang-Seung, 2000. "Free-Trade Areas and Welfare: An Equilibrium Analysis," Review of International Economics, Wiley Blackwell, vol. 8(2), pages 336-47, May.
  19. Bohara, Alok K. & Gawande, Kishore & Sanguinetti, Pablo, 2004. "Trade diversion and declining tariffs: evidence from Mercosur," Journal of International Economics, Elsevier, vol. 64(1), pages 65-88, October.
  20. Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, 2008. "Does Regionalism Affect Trade Liberalization toward NonMembers?," The Quarterly Journal of Economics, MIT Press, vol. 123(4), pages 1531-1575, November.
  21. Eric W. Bond & Jee-Hyeong Park, 2002. "Gradualism in Trade Agreements with Asymmetric Countries," Review of Economic Studies, Oxford University Press, vol. 69(2), pages 379-406.
  22. Erhan Artuc & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: A Structural Empirical Approach," NBER Working Papers 13465, National Bureau of Economic Research, Inc.
  23. John McLaren, 2002. "A Theory Of Insidious Regionalism," The Quarterly Journal of Economics, MIT Press, vol. 117(2), pages 571-608, May.
  24. Grossman, Gene M & Helpman, Elhanan, 1994. "Protection for Sale," American Economic Review, American Economic Association, vol. 84(4), pages 833-50, September.
  25. Andrew Bernard & Stephen Redding & Peter Schott, 2004. "Comparative advantage and heterogeneous firms," IFS Working Papers W04/24, Institute for Fiscal Studies.
  26. J.P. Neary, 1997. "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs and Subsidies to High Technology Industries," CEP Discussion Papers dp0346, Centre for Economic Performance, LSE.
  27. Richard Chisik, 2010. "Export Industry Policy and Reputational Comparative Advantage," Working Papers 017, Ryerson University, Department of Economics.
  28. Hasan, Rana & Mitra, Devashish & Ranjan, Priya & Ahsan, Reshad N., 2012. "Trade liberalization and unemployment: Theory and evidence from India," Journal of Development Economics, Elsevier, vol. 97(2), pages 269-280.
  29. 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 823-39, December.
  30. Emanuel Ornelas, 2007. "Exchanging market access at the outsiders' expense: the case of customs unions," Canadian Journal of Economics, Canadian Economics Association, vol. 40(1), pages 207-224, February.
  31. Kyle Bagwell & Robert W. Staiger, 2001. "Domestic Policies, National Sovereignty, And International Economic Institutions," The Quarterly Journal of Economics, MIT Press, vol. 116(2), pages 519-562, May.
  32. Baldwin, Richard, 2011. "21st century regionalism: Filling the gap between 21st century trade and 20th century trade rules," WTO Staff Working Papers ERSD-2011-08, World Trade Organization (WTO), Economic Research and Statistics Division.
  33. Grossman, Gene & Helpman, Elhanan, 1994. "The Politics of Free Trade Agreements," CEPR Discussion Papers 908, C.E.P.R. Discussion Papers.
  34. Krugman, Paul, 1980. "Scale Economies, Product Differentiation, and the Pattern of Trade," American Economic Review, American Economic Association, vol. 70(5), pages 950-59, December.
  35. Caroline Freund, 2010. "Third‐country Effects of Regional Trade Agreements," The World Economy, Wiley Blackwell, vol. 33(11), pages 1589-1605, November.
  36. Richardson, Martin, 1993. "Endogenous protection and trade diversion," Journal of International Economics, Elsevier, vol. 34(3-4), pages 309-324, May.
  37. repec:fth:geneec:96.07 is not listed on IDEAS
  38. Ornelas, Emanuel, 2008. "Feasible multilateralism and the effects of regionalism," Journal of International Economics, Elsevier, vol. 74(1), pages 202-224, January.
  39. Saggi, Kamal & Yildiz, Halis Murat, 2009. "Bilateralism, multilateralism, and the quest for global free trade," MPRA Paper 17558, University Library of Munich, Germany.
  40. Kemp, Murray C. & Wan, Henry Jr., 1976. "An elementary proposition concerning the formation of customs unions," Journal of International Economics, Elsevier, vol. 6(1), pages 95-97, February.
  41. Kyle Bagwell, 2009. "Self-Enforcing Trade Agreements and Private Information," NBER Working Papers 14812, National Bureau of Economic Research, Inc.
  42. Ozden, Caglar & Reinhardt, Eric, 2003. "The perversity of preferences : GSP and developing country trade policies, 1976 - 2000," Policy Research Working Paper Series 2955, The World Bank.
  43. Ronald W. Jones, 1965. "The Structure of Simple General Equilibrium Models," Journal of Political Economy, University of Chicago Press, vol. 73, pages 557.
  44. Ana Cristina Molina, 2010. "Are Preferential Agreements Stepping Stones To Other Markets?," IHEID Working Papers 13-2010, Economics Section, The Graduate Institute of International Studies.
  45. Goldberg, Pinelopi Koujianou & Pavcnik, Nina, 2003. "Trade, Wages and the Political Economy of Trade Protection: Evidence from the Colombian Trade Reforms," CEPR Discussion Papers 3877, C.E.P.R. Discussion Papers.
  46. Morales, Eduardo & Sheu, Gloria & Zahler, Andrés, 2011. "Gravity and extended gravity: estimating a structural model of export entry," MPRA Paper 30311, University Library of Munich, Germany.
  47. Stephen Cameron & Shubham Chaudhuri & John McLaren, 2007. "Trade Shocks and Labor Adjustment: Theory," NBER Working Papers 13463, National Bureau of Economic Research, Inc.
  48. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
  49. Donald R. Davis & James Harrigan, 2007. "Good jobs, bad jobs, and trade liberalization," Discussion Papers 0607-07, Columbia University, Department of Economics.
  50. Bond, Eric W. & Riezman, Raymond G. & Syropoulos, Constantinos, 2004. "A strategic and welfare theoretic analysis of free trade areas," Journal of International Economics, Elsevier, vol. 64(1), pages 1-27, October.
  51. Leonardo Iacovone & BeataS. Javorcik, 2010. "Multi-Product Exporters: Product Churning, Uncertainty and Export Discoveries," Economic Journal, Royal Economic Society, vol. 120(544), pages 481-499, 05.
  52. repec:stn:sotoec:1003 is not listed on IDEAS
  53. Shubham Chaudhuri & Erhan Artuç & John McLaren, 2003. "Delay and dynamics in labor market adjustment: Simulation results," Discussion Papers 0304-07, Columbia University, Department of Economics.
  54. Caroline Freund & Emanuel Ornelas, 2010. "Regional trade agreements: blessing or burden?," CentrePiece - The Magazine for Economic Performance 313, Centre for Economic Performance, LSE.
  55. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  56. Dix-Carneiro, Rafael, 2011. "Trade liberalization and labor market dynamics," WTO Staff Working Papers ERSD-2011-19, World Trade Organization (WTO), Economic Research and Statistics Division.
  57. Molina, Ana Cristina & Bussolo, Maurizio & Iacovone, Leonardo, 2010. "The DR-CAFTA and the extensive margin : a firm-level analysis," Policy Research Working Paper Series 5340, The World Bank.
  58. Flam, Harry, 1998. " Comment on J. P. Neary, "Pitfalls in the Theory of International Trade Policy: Concertina Reforms of Tariffs, and Subsidies to High-Technology Industries."," Scandinavian Journal of Economics, Wiley Blackwell, vol. 100(1), pages 210-12, March.
  59. John Kennan & Raymond Riezman, 1990. "Optimal Tariff Equilibria with Customs Unions," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 70-83, February.
  60. Emanuel Ornelas, 2005. "Rent Destruction and the Political Viability of Free Trade Agreements," The Quarterly Journal of Economics, MIT Press, vol. 120(4), pages 1475-1506, November.
  61. Krugman, Paul R., 1979. "Increasing returns, monopolistic competition, and international trade," Journal of International Economics, Elsevier, vol. 9(4), pages 469-479, November.
  62. Jean-Pierre Chauffour & Jean-Christophe Maur, 2011. "Preferential Trade Agreement Policies for Development : A Handbook," World Bank Publications, The World Bank, number 2329, March.
  63. Davidson, Carl & Matusz, Steven J. & Shevchenko, Andrei, 2008. "Globalization and firm level adjustment with imperfect labor markets," Journal of International Economics, Elsevier, vol. 75(2), pages 295-309, July.
  64. Mary Hallward-Driemeier & Giuseppe Iarossi & Kenneth L. Sokoloff, 2002. "Exports and Manufacturing Productivity in East Asia: A Comparative Analysis with Firm-Level Data," NBER Working Papers 8894, National Bureau of Economic Research, Inc.
  65. Nuno Lim�o, 2007. "Are Preferential Trade Agreements with Non-trade Objectives a Stumbling Block for Multilateral Liberalization?," Review of Economic Studies, Oxford University Press, vol. 74(3), pages 821-855.
  66. Pravin Krishna, 2003. "Are Regional Trading Partners "Natural"?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 202-231, February.
  67. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1988. "The Structure of Simple General Equilibrium Models with Frictional Unemployment," Journal of Political Economy, University of Chicago Press, vol. 96(6), pages 1267-93, December.
  68. Panagariya, Arvind & Krishna, Pravin, 2002. "On necessarily welfare-enhancing free trade areas," Journal of International Economics, Elsevier, vol. 57(2), pages 353-367, August.
  69. Baier, Scott L. & Bergstrand, Jeffrey H., 2004. "Economic determinants of free trade agreements," Journal of International Economics, Elsevier, vol. 64(1), pages 29-63, October.
  70. 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.
  71. repec:bla:restud:v:77:y:2010:i:3:p:1100-1137 is not listed on IDEAS
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:8805. 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: ()

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.