Trade Adjustment Assistance and Pareto Gains From Trade
In a model where all factors of production are imperfectly mobile, we argue that the Dixit-Norman scheme of commodity taxes may not lead to strict Pareto gains from trade. Rather, this scheme must be augmented by policies which give factors an incentive to move: hence, the role for trade adjustment assistance (TAA). We demonstrate that by knowledge of the distribution of adjustment costs across individuals, the government can offer a single TAA subsidy to all individuals willing to move between industries, and maintain a non-negative budget. The TAA subsidy, combined with the Dixit-Norman pattern of commodity taxes, can lead to Pareto gains from trade under the conditions we identify.
|Date of creation:||Sep 1991|
|Date of revision:|
|Publication status:||published as Journal of International Economics, vo. 36, no. 3/4, May 1994, pp. 201|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, vol. 88(351), pages 488-510, September.
- Peter A. Diamond, 1982. "Protection, Trade Adjustment Assistance, and Income Distribution," NBER Chapters, in: Import Competition and Response, pages 123-150 National Bureau of Economic Research, Inc.
- Mussa, Michael, 1974. "Tariffs and the Distribution of Income: The Importance of Factor Specificity, Substitutability, and Intensity in the Short and Long Run," Journal of Political Economy, University of Chicago Press, vol. 82(6), pages 1191-1203, Nov.-Dec..
- Blackorby, Charles & Donaldson, David, 1988. "Cash versus Kind, Self-selection, and Efficient Transfers," American Economic Review, American Economic Association, vol. 78(4), pages 691-700, September.
- Leamer, Edward E., 1980. "Welfare computations and the optimal staging of tariff reductions in models with adjustment costs," Journal of International Economics, Elsevier, vol. 10(1), pages 21-36, February.
- Robert C. Feenstra & Tracy R. Lewis, 1991.
"Distributing The Gains From Trade With Incomplete Information,"
Economics and Politics,
Wiley Blackwell, vol. 3(1), pages 21-39, 03.
- Robert Feenstra & Tracy R. Lewis, 1990. "Distributing the Gains from Trade With Incomplete Information," NBER Working Papers 3277, National Bureau of Economic Research, Inc.
- Feentra, R.C. & Lewis, T.R., 1990. "Distributing The Gains From Trade With Incomplete Information," Papers 352, California Davis - Institute of Governmental Affairs.
- James A. Brander & Barbara J. Spencer, 1989.
"Trade Adjustment Assistance: Welfare and Incentive Effects of Payments to Displaced Workers,"
NBER Working Papers
3071, National Bureau of Economic Research, Inc.
- Brander, James A. & Spencer, Barbara J., 1994. "Trade adjustment assistance : Welfare and incentive effects of payments to displaced workers," Journal of International Economics, Elsevier, vol. 36(3-4), pages 239-261, May.
- Mayer, Wolfgang, 1974. "Short-Run and Long-Run Equilibrium for a Small Open Economy," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 955-67, Sept./Oct.
- Richard A. Brecher & Ehsan U. Choudhri, 1990. "Gains from International Factor Movements without Lump-Sum Compensation: Taxation by Location versus Nationality," Canadian Journal of Economics, Canadian Economics Association, vol. 23(1), pages 44-59, February.
- Kemp, Murray C. & Wan, Henry Jr., 1986. "Gains from trade with and without lump-sum compensation," Journal of International Economics, Elsevier, vol. 21(1-2), pages 99-110, August.
- Grossman, Gene M., 1983. "Partially mobile capital : A general approach to two-sector trade theory," Journal of International Economics, Elsevier, vol. 15(1-2), pages 1-17, August.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:3845. 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 references are entirely missing, you can add them using this form.