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Adjustment and Income Distribution Impacts of the Trans-Pacific Partnership

Author

Listed:
  • Robert Z. Lawrence

    () (Peterson Institute for International Economics)

  • Tyler Moran

    () (Peterson Institute for International Economics)

Abstract

This paper estimates the adjustment costs of the Trans-Pacific Partnership (TPP) on workers and compares these costs with the agreement's benefits. It also estimates the TPP's impact on the distribution of income across US households. Between 2017 and 2026, when most of the adjustment to the TPP occurs, the costs to workers who will be displaced, both from unemployment and lower future wages, will amount to about 6 percent of the agreement's benefits. For the full adjustment period (2017-30) that Peter Petri and Michael Plummer (2016) consider, the benefits are more than 100 times the costs. The benefits from the agreement will be widely shared. The percentage gains for labor income from the TPP will be slightly greater than the gains to capital income. Households in all quintiles will benefit by similar percentages, but once differences in spending shares are taken into account, the percentage gains to poor and middle-class households will be slightly larger than the gains to households at the top. Thus the agreement will confer net benefits to households at all levels of income and will certainly not worsen income inequality. While the United States as a whole would benefit from the TPP, there is a case for an assistance program that would compensate those who lose.

Suggested Citation

  • Robert Z. Lawrence & Tyler Moran, 2016. "Adjustment and Income Distribution Impacts of the Trans-Pacific Partnership," Working Paper Series WP16-5, Peterson Institute for International Economics.
  • Handle: RePEc:iie:wpaper:wp16-5
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    References listed on IDEAS

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    Cited by:

    1. Dean Baker, 2016. "The International Trade Commission’s Assessment of the Trans-Pacific Partnership: Main Findings and Implications," CEPR Reports and Issue Briefs 2016-20, Center for Economic and Policy Research (CEPR).

    More about this item

    Keywords

    Trade Adjustment Costs; Inequality; Income Distribution;

    JEL classification:

    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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