International trade and domestic distortions

Jean-Luc Gaffard and Francesco Saraceno

Post-Print from HAL

Abstract: When full competition prevails in product, labor, and capital markets, positive or negative external trade shocks may be accommodated by the migration of jobs between sectors; the negative impact on some households' income of lower nominal wages will be more than offset by lower prices of imported final goods. Unemployment, if any, will be temporary, unless labor market rigidities prevent the necessary adjustment. By contrast, we argue that trade shocks trigger a process of creative destruction that necessarily causes distortions in the structure of productive capacity and, hence, market disequilibria. Therefore, the structural change that follows trade shocks can no longer be analyzed within an equilibrium framework. The transition following a shock may be characterized by increasing imbalances, and create scope for policy intervention. The model presented in this paper, which focuses on the time dimension of production and market imbalances, allows us to clarify the debate.

Keywords: Globalization; Trade; Financial constraints; Creative destruction; Wage flexibility; Time to build; Firm migration (search for similar items in EconPapers)
Date: 2012
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Published in Journal of Evolutionary Economics, 2012, 22 (2), pp.275-301. ⟨10.1007/s00191-011-0244-2⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: International trade and domestic distortions (2012)
Working Paper: International trade and domestic distortions (2012)
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:hal:journl:halshs-00931034

DOI: 10.1007/s00191-011-0244-2

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD (hal@ccsd.cnrs.fr).