Trade Liberalisation with Costly Adjustment

Alvaro Forteza () and Rossana Patron

Journal of Applied Economics, 2003, vol. 06, issue 01, 31

Abstract: The paper analyses the efficiency and the distributional effects of eliminating a tariff in a protected sector, in a Heckscher-Ohlin model of trade with costs of adjustment. The tariff can be eliminated at the onset or after a while. In case of postponing it the government may pre-announce the policy change or may not do it and surprise the private sector. It is shown that while large adjustment costs reduce the efficiency gains from trade liberalisation, small to moderate adjustment costs may raise the efficiency gains from a pre-announced liberalisation. The adjustment costs reduce the effects on factor returns from a sudden unanticipated liberalisation. The distributional effects of trade liberalisations are more complex when the policy is pre-announced. For small and moderate levels, the adjustment costs may increase the effects of the policy on factor returns. Also, the “value of the announcement” rises with the adjustment costs.

Keywords: International; Relations/Trade (search for similar items in EconPapers)
Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/44058/files/forteza.pdf (application/pdf)

Related works:
Journal Article: Trade Liberalisation with Costly Adjustment (2003)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:jaecon:44058

DOI: 10.22004/ag.econ.44058

Access Statistics for this article

More articles in Journal of Applied Economics from Universidad del CEMA Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().