Is Public Opinion Right and Conventional Economics Wisdom Wrong About Commercial Policy

L. Arvan and F. Schoumaker

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: We Embed an Efficiency Wage View of the Labor Market a la Shapiro and Stiglitz (1984) Into the Standard Hecksher-Ohlin Framework. We Demonstrate How a Small Trading Country Can Utilize an Activist Commercial Policy to Remedy Labor Market Inefficiencies. Laissez-Faire Is Not Optimal. the Optimal Policy Depends on Whether the Import Competing Sector Is Labor Intensive (A Tariff Is Optimal) Or Capital Intensive (An Export Subsidy Is Optimal).

Keywords: Efficiency; Wages; Commercial Policy; Tariffs (search for similar items in EconPapers)
Date: Written 1987

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