Trade Liberalization and Compensation
Liberalization harms some groups while generating aggregate benefits. We consider various labor market policies that might be used to compensate those who lose from freer trade. Our goal is to find the policy that compensates each group of losers at the lowest cost to the economy. We argue that wage subsidies should be used to compensate those who bear the adjustment costs triggered by liberalization while employment subsidies should be used to compensate those who remain trapped in the previously protected sector. Our analysis indicates that the cost of compensation is low, provided that the right policy is used.
|Date of creation:||15 Mar 2005|
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|Note:||Type of Document - pdf; pages: 46. 46 pages, PDF file|
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- Brecher, Richard A. & Choudhri, Ehsan U., 1994. "Pareto gains from trade, reconsidered : Compensating for jobs lost," Journal of International Economics, Elsevier, vol. 36(3-4), pages 223-238, May.
- 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.
- 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.
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