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International trade and domestic distortions

Listed author(s):
  • Jean-Luc Gaffard

    ()

    (SKEMA Business School - SKEMA Business School, GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - CNRS - Centre National de la Recherche Scientifique, OFCE - Observatoire Français des Conjonctures économiques - Institut d'Études Politiques [IEP] - Paris - Fondation Nationale des Sciences Politiques [FNSP])

  • Francesco Saraceno

    (OFCE - Observatoire Français des Conjonctures économiques - Institut d'Études Politiques [IEP] - Paris - Fondation Nationale des Sciences Politiques [FNSP])

When full competition prevails in product, labor, and capital markets, positive or negative external trade shocks may be accommodated by the migration of jobs between sectors; the negative impact on some households' income of lower nominal wages will be more than offset by lower prices of imported final goods. Unemployment, if any, will be temporary, unless labor market rigidities prevent the necessary adjustment. By contrast, we argue that trade shocks trigger a process of creative destruction that necessarily causes distortions in the structure of productive capacity and, hence, market disequilibria. Therefore, the structural change that follows trade shocks can no longer be analyzed within an equilibrium framework. The transition following a shock may be characterized by increasing imbalances, and create scope for policy intervention. The model presented in this paper, which focuses on the time dimension of production and market imbalances, allows us to clarify the debate.

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Paper provided by HAL in its series Post-Print with number halshs-00931034.

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Date of creation: 2012
Publication status: Published in Journal of Evolutionary Economics, Springer Verlag (Germany), 2012, 22 (2), pp.275-301
Handle: RePEc:hal:journl:halshs-00931034
Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-00931034
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. 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.
  2. J. R. Hicks, 1953. "An Inaugural Lecture," Oxford Economic Papers, Oxford University Press, vol. 5(2), pages 117-135.
  3. Mario Amendola & Jean-Luc Gaffard & Francesco Saraceno, 2004. "Wage Flexibility and Unemployment: The Keynesian Perspective Revisited," Scottish Journal of Political Economy, Scottish Economic Society, vol. 51(5), pages 654-674, November.
  4. Amendola, Mario & Gaffard, Jean-Luc, 1998. "Out of Equilibrium," OUP Catalogue, Oxford University Press, number 9780198293804.
  5. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
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