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Adjustment and Income Distribution Impacts of the Trans-Pacific Partnership

Listed author(s):
  • Robert Z. Lawrence

    ()

    (Peterson Institute for International Economics)

  • Tyler Moran

    ()

    (Peterson Institute for International Economics)

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.

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Paper provided by Peterson Institute for International Economics in its series Working Paper Series with number WP16-5.

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Date of creation: Mar 2016
Handle: RePEc:iie:wpaper:wp16-5
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  1. David H. Autor & David Dorn & Gordon H. Hanson, 2016. "The China Shock: Learning from Labor-Market Adjustment to Large Changes in Trade," Annual Review of Economics, Annual Reviews, vol. 8(1), pages 205-240, October.
  2. Peter A. Petri & Michael G. Plummer, 2016. "The Economic Effects of the Trans-Pacific Partnership: New Estimates," Working Paper Series WP16-2, Peterson Institute for International Economics.
  3. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
  4. W. Reed Walker, 2013. "The Transitional Costs of Sectoral Reallocation: Evidence From the Clean Air Act and the Workforce," The Quarterly Journal of Economics, Oxford University Press, vol. 128(4), pages 1787-1835.
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  7. Andrew B. Bernard & Stephen J. Redding & Peter K. Schott, 2007. "Comparative Advantage and Heterogeneous Firms," Review of Economic Studies, Oxford University Press, vol. 74(1), pages 31-66.
  8. Robert Z. Lawrence & Lawrence Edward, 2010. "US Trade and Wages: The Misleading Implications of Conventional Trade Theory," Working Paper Series WP10-9, Peterson Institute for International Economics.
  9. G. M. Grossman & K. Rogoff (ed.), 1995. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 3, number 3.
  10. Lori G. Kletzer & Robert E. Litan, 2001. "A Prescription to Relieve Worker Anxiety," Policy Briefs PB01-02, Peterson Institute for International Economics.
  11. Subramanian Rangan & Robert Z. Lawrence, 1993. "The Responses of U.S. Firms to Exchange Rate Fluctuations: Piercing the Corporate Veil," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 341-379.
  12. Wolfgang F. Stolper & Paul A. Samuelson, 1941. "Protection and Real Wages," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 58-73.
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  14. Avraham Ebenstein & Ann Harrison & Margaret McMillan, 2015. "Why are American Workers getting Poorer? China, Trade and Offshoring," NBER Working Papers 21027, National Bureau of Economic Research, Inc.
  15. Lawrence Edwards & Robert Z. Lawrence, 2013. "Rising Tide: Is Growth in Emerging Economies Good for the United States?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 5003, November.
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