Adjusting to trade policy reform
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.
|Date of creation:||31 Jul 1999|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.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.:
- Schaffner, Julie Anderson, 1993. "Rural labor legislation and permanent agricultural employment in Northeastern Brazil," World Development, Elsevier, vol. 21(5), pages 705-719, May.
- David G. Blanchflower & Andrew J. Oswald, 1995.
"The Wage Curve,"
MIT Press Books,
The MIT Press,
edition 1, volume 1, number 026202375x, September.
- Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-235.
- David G. Blanchflower & Andrew J. Oswald, 1989. "The Wage Curve," NBER Working Papers 3181, National Bureau of Economic Research, Inc.
- Blanchflower, D. & Oswald, A., 1989. "The Wage Curve," Papers 340, London School of Economics - Centre for Labour Economics.
- 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.
- Louis S. Jacobson & Robert J. LaLonde & Daniel Sullivan, 1992. "Earnings Losses of Displaced Workers," Upjohn Working Papers and Journal Articles 92-11, W.E. Upjohn Institute for Employment Research.
- Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1992. "Earnings losses of displaced workers," Working Paper Series, Macroeconomic Issues 92-28, Federal Reserve Bank of Chicago.
- Jaime de Melo & David Tarr, 2015. "Welfare Costs Of U.S. Quotas In Textiles, Steel And Autos," World Scientific Book Chapters, in: Modeling Developing Countries' Policies in General Equilibrium, chapter 21, pages 451-459 World Scientific Publishing Co. Pte. Ltd..
- Jaime de Melo & David Tarr, 2014. "Welfare Costs Of U.S. Quotas In Textiles, Steel And Autos," World Scientific Book Chapters, in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 2, pages 39-47 World Scientific Publishing Co. Pte. Ltd..
- 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 489-497, August.
- de Melo, Jaime & Tarr, David, 1988. "Welfare costs of U.S. quotas on textiles, steel, and autos," Policy Research Working Paper Series 83, The World Bank.
- de Melo, Jaime & Tarr, David, 1990. "Welfare Costs of US Quotas in Textiles, Steel and Autos," CEPR Discussion Papers 401, C.E.P.R. Discussion Papers.
- 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.
- Peter F. Orazem & Milan Vodopivec & Ruth Wu, 2005. "Worker displacement during the transition: Experience from Slovenia," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 13(2), pages 311-340, 04.
- Orazem, Peter & Vodopivec, Milan & Wu, Ruth, 1995. "Worker displacement during the transition : experience from Slovenia," Policy Research Working Paper Series 1449, The World Bank.
- Orazem, Peter F. & Vodopivec, Milan & Wu, Ruth, 2004. "Worker Displacement during the Transition: Experience from Slovenia," IZA Discussion Papers 1297, Institute for the Study of Labor (IZA).
- Orazem, Peter & Vodopivec, Milan & Wu, Ruth, 2004. "Worker Displacement During The Transition: Experience From Slovenia," Staff General Research Papers Archive 12032, Iowa State University, Department of Economics.
- Reint Gropp & Liam P. Ebrill & Janet Gale Stotsky, 1999. "Revenue Implications of Trade Liberalization," IMF Occasional Papers 180, International Monetary Fund.
- Morgan, Peter & Manning, Richard, 1985. "Optimal Search," Econometrica, Econometric Society, vol. 53(4), pages 923-944, July.
- Hoddinott, John, 1996. "Wages and Unemployment in an Urban African Labour Market," Economic Journal, Royal Economic Society, vol. 106(439), pages 1610-1626, November.
- 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.
- 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.
- Takacs, Wendy E & Winters, L Alan, 1991. "Labour Adjustment Costs and British Footwear Protection," Oxford Economic Papers, Oxford University Press, vol. 43(3), pages 479-501, July.
- Winters, L. Alan, 1990. "Labour Adjustment Costs and British Footwear Protection," CEPR Discussion Papers 376, C.E.P.R. Discussion Papers.
- Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
- 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.
- Peter R. Fallon & Robert E. B. Lucas, 1989. "Job Security Regulations and the Dynamic Demand for Industrial Labor in India and Zimbabwe," Boston University - Institute for Economic Development 2, Boston University, Institute for Economic Development.
- 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.
- 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.
- 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.
- 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 939-949, November.
- 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 102-110, February.
- Gilles Saint-Paul, 1995. "The High Unemployment Trap," The Quarterly Journal of Economics, Oxford University Press, vol. 110(2), pages 527-550.
- 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.
- 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.
- 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 545-564, September.
- 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.
- 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 1146-1155, December.
- 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 423-438, September.
- Panagariya, Arvind & Rodrik, Dani, 1993. "Political-Economy Arguments for a Uniform Tariff," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 34(3), pages 685-703, August.
- Arvind Panagariya & Dani Rodrik, 1991. "Political-Economy Arguments for a Uniform Tariff," NBER Working Papers 3661, National Bureau of Economic Research, Inc.
- 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.
- Christopher J. O'Leary, "undated". "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.
- Rama, Martin & DEC, 1994. "Flexibility in Sri Lanka's labor market," Policy Research Working Paper Series 1262, The World Bank. Full references (including those not matched with 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 references are entirely missing, you can add them using this form.