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Does Trade Liberalization Benefit Young and Old Alike?

Author

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  • Gokcekus, Omer
  • Tower, Edward

Abstract

In an overlapping generations model, capital and labor produce two tradeable goods. A kleptocratic government spends the tariff revenue. Trade liberalization, which lowers the relative price of the importable to the private sector, benefits the retired generation if and only if the relative price of the capital intensive good rises. Starting from autarky, it benefits subsequent generations if and only if it hurts the retired one, a result reminiscent of the Stolper Samuelson theorem. However, if the country is initially importing the good whose relative price falls, the terms-of-trade effect makes it possible for the welfare of all generations to rise.

Suggested Citation

  • Gokcekus, Omer & Tower, Edward, 1996. "Does Trade Liberalization Benefit Young and Old Alike?," Working Papers 96-35, Duke University, Department of Economics.
    • Handle: RePEc:duk:dukeec:96-35
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    Cited by:

    1. Seneviratne, Prathi, 2025. "The unintended consequences of compensating trade’s losers," Economic Modelling, Elsevier, vol. 145(C).
    2. Fedotenkov, Igor & Van Groezen, Bas & Meijdam, Lex, 2019. "International trade with pensions and demographic shocks," Journal of Pension Economics and Finance, Cambridge University Press, vol. 18(1), pages 140-164, January.
    3. Claustre Bajona & Timothy J. Kehoe, 2006. "Demographics in dynamic Heckscher-Ohlin models: overlapping generations versus infinitely lived consumers," Staff Report 377, Federal Reserve Bank of Minneapolis.

    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations

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