Distributional Effects of Commercial Policies in a Small Open Developing Economy Under Imperfect Labor Mobility

Chuhwan Park
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Chuhwan Park: ETRI

Korean Economic Review, 2001, vol. 17, 99-114

Abstract: This paper extends the Mussa's model (1982) which shows that the owners of a mobile factor will be interested in securing protection for the industry in which they are employed if the factor is imperfectly substitutable and the interests are especially strong when the degree of mobility is low. By incorporating some important considerations to LDCs, namely, urban nontraded good production and labor market segmentation, this paper shows that there may be a production trap in the urban nontraded good production in which the interests of factor owners in commercial policies may be reversed from those of the Mussa's model under some plausible demand conditions. This paper also shows that the degree of factor mobility may not go in one direction with factor returns, contrary to the major conclusion of the Mussa's model.

Keywords: factor mobility; nontraded good production; production trap; labor market segmentations (search for similar items in EconPapers)
JEL-codes: D33 F13 (search for similar items in EconPapers)
Date: 2001
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