Why Empirical Data Cannot Tell Us What to Do about Policy

Steven Suranovic

Chapter Chapter 3 in A Moderate Compromise, 2010, pp 43-65 from Palgrave Macmillan

Abstract: Abstract Economic theory strongly supports the following two conclusions: first, trade liberalization will result in a complex redistribution of income; and second, depending on the circumstances, trade liberalization can lead either to an improvement or to a reduction in a nation’s total welfare. Although theory can identify some of the characteristics of those who might gain and lose, without careful empirical measurement, it is impossible to know precisely who will gain and lose how much from freer trade. Whether national welfare rises or falls is important too, since economists often assuage the income redistribution concerns by suggesting that compensation be given to the losers from trade, drawn from the extra benefits accruing to the winners. However, the only way to ensure that everyone gains from free trade after compensation is if there is a positive national welfare effect from trade liberalization.

Keywords: National Welfare; Policy Change; Free Trade; Trade Liberalization; Child Labor (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-11460-9_3

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DOI: 10.1057/9780230114609_3

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