IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Adjusting to trade policy reform

  • Matusz, Steven J.
  • Tarr, David

Virtually all of the studies that quantify the adjustment costs of trade liberalization relative to the benefits point to the conclusion that adjustment costs are small in relation to the benefits of trade liberalization. The explanation for low adjustment costs is that: These costs are typically short-term and end when workers find a job, but the benefits grow as the economy does. Unemployment doesn't last long, especially where workers'pay was not substantial in the original job. Normal labor turnover often exceeds job displacement from trade liberalization. Moreover, studies that examine the impact of trade liberalization on employment in developing countries find there is little decline--and usually an increase--in manufacturing employment in developing countries a year after trade liberalization, for three reasons: 1) Developing countries tend to have comparative advantage in labor-intensive industries, and trade liberalization tends to favor labor. 2) Inter-industry shifts occur after trade liberalization, which minimizes the dislocation of factors of production. 3) In many industries, normal labor turnover exceeds dislocation from trade liberalization, so downsizing, when necessary can be accomplished without much forced unemployment. The authors recommend a uniform tariff to minimize special-interest lobbying for protection since it diffuses the benefits of protection.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/1999/09/09/000094946_9907270951199/Rendered/PDF/multi_page.pdf
Download Restriction: no

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2142.

as
in new window

Length:
Date of creation: 31 Jul 1999
Date of revision:
Handle: RePEc:wbk:wbrwps:2142
Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. 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.
  2. Orazem, Peter & Vodopivec, Milan & Wu, Ruth, 1995. "Worker displacement during the transition : experience from Slovenia," Policy Research Working Paper Series 1449, The World Bank.
  3. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
  4. Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
  5. Mutti, John H, 1978. "Aspects of Unilateral Trade Policy and Factor Adjustment Costs," The Review of Economics and Statistics, MIT Press, vol. 60(1), pages 102-10, February.
  6. Schaffner, Julie Anderson, 1993. "Rural labor legislation and permanent agricultural employment in Northeastern Brazil," World Development, Elsevier, vol. 21(5), pages 705-719, May.
  7. Fallon, Peter R. & Lucas, Robert E. B., 1993. "Job security regulations and the dynamic demand for industrial labor in India and Zimbabwe," Journal of Development Economics, Elsevier, vol. 40(2), pages 241-275, April.
  8. Rama, Martin & MacIsaac, Donna, 1999. "Earnings and Welfare after Downsizing: Central Bank Employees in Ecuador," World Bank Economic Review, World Bank Group, vol. 13(1), pages 89-116, January.
  9. Santiago Levy & Sweder van Wijnbergen, 1992. "Mexican Agriculture in the Free Trade Agreement: Transition Problems in Economic Reform," OECD Development Centre Working Papers 63, OECD Publishing.
  10. Christopher J. O'Leary, . "Performance Indicators: A Management Assessment Tool for Active Labour Programmes in Hungary and Poland," Upjohn Working Papers and Journal Articles cjo19953, W.E. Upjohn Institute for Employment Research.
  11. Steel, William F & Webster, Leila M, 1992. "How Small Enterprises in Ghana Have Responded to Adjustment," World Bank Economic Review, World Bank Group, vol. 6(3), pages 423-38, September.
  12. Paul T. Decker & Walter Corson, 1995. "International Trade and Worker Displacement: Evaluation of the Trade Adjustment Assistance Program," ILR Review, Cornell University, ILR School, vol. 48(4), pages 758-774, July.
  13. Arvind Panagariya & Dani Rodrik, 1991. "Political-Economy Arguments for a Uniform Tariff," NBER Working Papers 3661, National Bureau of Economic Research, Inc.
  14. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-46, December.
  15. Morgan, Peter & Manning, Richard, 1985. "Optimal Search," Econometrica, Econometric Society, vol. 53(4), pages 923-44, July.
  16. Mead, Donald C. & Liedholm, Carl, 1998. "The dynamics of micro and small enterprises in developing countries," World Development, Elsevier, vol. 26(1), pages 61-74, January.
  17. de Melo, Jaime & Tarr, David, 1990. "Welfare Costs of U.S. Quotas in Textiles, Steel and Autos," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 489-97, August.
  18. Baldwin, Robert E. & Mutti, John H. & Richardson, J. David, 1980. "Welfare effects on the United States of a significant multilateral tariff reduction," Journal of International Economics, Elsevier, vol. 10(3), pages 405-423, August.
  19. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September.
  20. Saint-Paul, Gilles, 1995. "The High Unemployment Trap," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 527-50, May.
  21. Dixon, Peter B. & Parmenter, B. R. & Powell, Alan A., 1984. "Trade liberalization and labor market disruption," Journal of Policy Modeling, Elsevier, vol. 6(4), pages 431-454, November.
  22. J. Peter Neary, 1982. "Intersectoral Capital Mobility, Wage Stickiness, and the Case for Adjustment Assistance," NBER Chapters, in: Import Competition and Response, pages 39-72 National Bureau of Economic Research, Inc.
  23. Fernandez, Raquel & Rodrik, Dani, 1991. "Resistance to Reform: Status Quo Bias in the Presence of Individual-Specific Uncertainty," American Economic Review, American Economic Association, vol. 81(5), pages 1146-55, December.
  24. Haltiwanger, John & Singh, Manisha, 1999. "Cross-Country Evidence on Public Sector Retrenchment," World Bank Economic Review, World Bank Group, vol. 13(1), pages 23-66, January.
  25. Reint Gropp & Liam P. Ebrill & Janet Gale Stotsky, 1999. "Revenue Implications of Trade Liberalization," IMF Occasional Papers 180, International Monetary Fund.
  26. Rama, Martin & DEC, 1994. "Flexibility in Sri Lanka's labor market," Policy Research Working Paper Series 1262, The World Bank.
  27. Winters, L. Alan, 1990. "Labour Adjustment Costs and British Footwear Protection," CEPR Discussion Papers 376, C.E.P.R. Discussion Papers.
  28. Michael Mussa, 1982. "Government Policy and the Adjustment Process," NBER Chapters, in: Import Competition and Response, pages 73-122 National Bureau of Economic Research, Inc.
  29. Steven J. Matusz, 1994. "International Trade Policy in a Model of Unemployment and Wage Differentials," Canadian Journal of Economics, Canadian Economics Association, vol. 27(4), pages 939-49, November.
  30. Hoddinott, John, 1996. "Wages and Unemployment in an Urban African Labour Market," Economic Journal, Royal Economic Society, vol. 106(439), pages 1610-26, November.
  31. Paul Decker & Walter Corson, 1995. "International trade and worker displacement: Evaluation of the Trade Adjustment Assistance Program," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 48(4), pages 758-774, July.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2142. 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: (Roula I. Yazigi)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.