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

Unemployment Benefits as Redistribution Scheme of Trade Gains - a Positive Analysis

  • Marco de Pinto
Registered author(s):

    Trade liberalization is no Pareto-improvement - there are winners (high-skilled) and losers (low-skilled). To compensate the losers the government is assumed to introduce unemployment benefits (UB). These benefits are financed by either a wage tax, a payroll tax, or a profit tax. Using a Melitz-type model of international trade with unionized labor markets and heterogeneous workers we show that: (i) there is a threshold level of UB where all trade gains are destroyed, (ii) this threshold differs between different kind of taxes, (iii) there is a clearcut ranking in terms of welfare for the chosen funding of the UB: 1. wage tax, 2. profit tax, 3. Payroll tax.

    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.fiw.ac.at/fileadmin/Documents/Publikationen/Working_Paper/N_092-Pinto.pdf
    File Function: full text
    Download Restriction: none

    Paper provided by FIW in its series FIW Working Paper series with number 092.

    as
    in new window

    Length: 41
    Date of creation: May 2012
    Date of revision:
    Handle: RePEc:wsr:wpaper:y:2012:i:092
    Contact details of provider:

    Order Information: Postal: FIW Project Office Austrian Institute of Economic Research Arsenal Objekt 20 A-1030 Vienna
    Email:


    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. Booth, Alison L, 1984. "A Public Choice Model of Trade Union Behaviour and Membership," Economic Journal, Royal Economic Society, vol. 94(376), pages 883-98, December.
    2. Haan, Peter & Prowse, Victoria L., 2010. "The Design of Unemployment Transfers: Evidence from a Dynamic Structural Life-Cycle Model," IZA Discussion Papers 4792, Institute for the Study of Labor (IZA).
    3. Helpman, Elhanan & Itskhoki, Oleg & Redding, Stephen J., 2009. "Inequality and Unemployment in a Global Economy," CEPR Discussion Papers 7353, C.E.P.R. Discussion Papers.
    4. Goerke, Laszlo, 1996. "Taxes on Payroll, Revenues and Profits in Three Models of Collective Bargaining," Scottish Journal of Political Economy, Scottish Economic Society, vol. 43(5), pages 549-65, November.
    5. Stephen Bazen & Jean-Marie Cardebat, 2001. "The impact of trade on the relative wages and employment of low skill workers in France," Applied Economics, Taylor & Francis Journals, vol. 33(6), pages 801-810.
    6. Nickell, Stephen & Kong, Paul, 1992. "An investigation into the power of insiders in wage determination," European Economic Review, Elsevier, vol. 36(8), pages 1573-1599, December.
    7. Kenneth R. Troske & Kimberly Bayard, 1999. "Examining the Employer-Size Wage Premium in the Manufacturing, Retail Trade, and Service Industries Using Employer-Employee Matched Data," American Economic Review, American Economic Association, vol. 89(2), pages 99-103, May.
    8. Donald R. Davis & James Harrigan, 2007. "Good Jobs, Bad Jobs, and Trade Liberalization," NBER Working Papers 13139, National Bureau of Economic Research, Inc.
    9. Felbermayr, Gabriel & Prat, Julien & Schmerer, Hans-Jörg, 2011. "Globalization and labor market outcomes: Wage bargaining, search frictions, and firm heterogeneity," Munich Reprints in Economics 20471, University of Munich, Department of Economics.
    10. Richard Brecher & Eshan Choudhri, 1991. "Pareto Gains from Trade, Reconsidered: Compensating for Job Lost," Carleton Economic Papers 91-16, Carleton University, Department of Economics, revised May 1994.
    11. Hartmut Egger & Udo Kreickemeier, 2007. "Firm Heterogeneity and the Labour Market Effects of Trade Liberalisation," CESifo Working Paper Series 2000, CESifo Group Munich.
    12. Layard, R. & Nickell, S., 1988. "Is Unemployment Lower If Unions Bargain Over Employment?," Papers 308, London School of Economics - Centre for Labour Economics.
    13. Marco Pinto & Jochen Michaelis, 2014. "International Trade and Unemployment—the Worker-selection Effect," Review of International Economics, Wiley Blackwell, vol. 22(2), pages 226-252, 05.
    14. Davidson, Carl & Matusz, Steven J. & Nelson, Douglas R., 2007. "Can compensation save free trade?," Journal of International Economics, Elsevier, vol. 71(1), pages 167-186, March.
    15. Jochen Michaelis & Michael Pflüger, 2000. "The impact of tax reforms on unemployment in a SMOPEC," Journal of Economics, Springer, vol. 72(2), pages 175-201, June.
    16. Hartmut Egger & Udo Kreickemeier, 2009. "Redistributing Gains from Globalisation," Scandinavian Journal of Economics, Wiley Blackwell, vol. 111(4), pages 765-788, December.
    17. Helpman, Elhanan & Itskhoki, Oleg, 2009. "Labor Market Rigidities, Trade, and Unemployment," CEPR Discussion Papers 7502, C.E.P.R. Discussion Papers.
    18. Pierre Biscourp & Francis Kramarz, 2004. "Employment, Skill Structure and International Trade : Firm-level Evidence for France," Working Papers 2004-28, Centre de Recherche en Economie et Statistique.
    19. Creedy, John & McDonald, Ian M, 1992. "Union Wage Responses to a Shift from Direct to Indirect Taxation," Bulletin of Economic Research, Wiley Blackwell, vol. 44(3), pages 221-32, July.
    20. Egger, Hartmut & Kreickemeier, Udo, 2012. "Fairness, trade, and inequality," Journal of International Economics, Elsevier, vol. 86(2), pages 184-196.
    21. Fitzenberger, Bernd & Wilke, Ralf A., 2004. "Unemployment Durations in West-Germany Before and After the Reform of the Unemployment Compensation System During the 1980s," ZEW Discussion Papers 04-24, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    22. Melitz, Marc J, 2002. "The Impact of Trade on Intra-Industry Reallocations and Aggregate Industry Productivity," CEPR Discussion Papers 3381, C.E.P.R. Discussion Papers.
    23. Carl Davidson & Steven Matusz, 2005. "Trade Liberalization and Compensation," International Trade 0503008, EconWPA.
    24. Michael P. Keane, 1993. "Individual Heterogeneity and Interindustry Wage Differentials," Journal of Human Resources, University of Wisconsin Press, vol. 28(1), pages 134-161.
    25. Munch, Jakob Roland & Rose Skaksen, Jan, 2009. "Human Capital and Wages in Exporting Firms," Working Papers 09-2006, Copenhagen Business School, Department of Economics.
    26. Dixit, Avinash & Norman, Victor, 1986. "Gains from trade without lump-sum compensation," Journal of International Economics, Elsevier, vol. 21(1-2), pages 111-122, August.
    27. Elhanan Helpman & Oleg Itskhoki & Stephen Redding, 2010. "Unequal Effects of Trade on Workers with Different Abilities," Journal of the European Economic Association, MIT Press, vol. 8(2-3), pages 421-433, 04-05.
    28. Oleg Itskhoki, 2009. "Optimal Redistribution in an Open Economy," 2009 Meeting Papers 967, Society for Economic Dynamics.
    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:wsr:wpaper:y:2012:i:092. 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 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.