Trade Liberalization and Compensation

Carl Davidson () and Steven J. Matusz ()

International Trade from EconWPA

Abstract: 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.

Keywords: International Trade; Liberalization; Compensation; Labor Market Policies (search for similar items in EconPapers)
JEL-codes: F1 F2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-int
Date: Written 2005-03-15
Note: Type of Document - pdf; pages: 46. 46 pages, PDF file
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http://129.3.20.41/eps/it/papers/0503/0503008.pdf (application/pdf)

Related works:
Journal Article: TRADE LIBERALIZATION AND COMPENSATION (2006)
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