When trade liberalization is selfâ€ fulfilling: Population aging and uncertainty
Economics and Politics, 2018, vol. 30, issue 2, 274-306
Expectation about future trade liberalization induces sectoral adjustment in advance. As a result, the extent of opposition to trade liberalization decreases, and liberalization becomes selfâ€ fulfilling. We analyze this mechanism from two aspects: population aging and uncertainty. Then, we show that (1) the effect of expectation formation is nonâ€ monotonic across ages, and (2) the effect of population aging of workforce varies depending on its driving force. In addition, we analyze uncertainty about future trade liberalization. Then, we show that (3) the mechanism cannot work due to strategic delay even under small uncertainty, but (4) a subsidy scheme can resolve this problem.
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