Sustaining Imperfectly Credible Trade Liberalization: Do the Rate of Tariff Reduction and the Degree of Labor Mobility Matter?

Robert Tatum ()

International Finance from EconWPA

Abstract: Imperfectly credible trade liberalization can lead to balance of payment deterioration and a subsequent reversal of the reform. Therefore, this paper examines whether the likelihood of policy reversal depends on the rate of tariff reduction or the degree of labor mobility. The analysis shows that transitory unemployment increases the likelihood of policy reversal. Furthermore, a gradual reduction in the tariff rate is found to extend the life of the liberalization episode, but does not necessarily increase the likelihood of sustained liberalization.

Keywords: Trade Liberalization; Credibility; Gradual reform; Transitory Unemployment; Balance of Payments (search for similar items in EconPapers)
JEL-codes: F4 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: 2005-06-15
Note: Type of Document - pdf; pages: 52
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Journal Article: Sustaining imperfectly credible trade liberalization: Do the rate of tariff reduction and the degree of labour mobility matter? (2005)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpif:0506007

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