Employment Risk and Optimal Trade Policies

Eun Choi, Hamid Beladi and Jiong Chen

Staff General Research Papers Archive from Iowa State University, Department of Economics

Abstract: This paper considers trade policies and welfare in a Harris-Todaro model with risk averse workers. Workers are assumed to have identical and homothetic preferences, but their incomes differ, depending on whether and where they are employed. When workers are equally valued, maximizing social utility is equivalent to maximizing the utility of a rural worker. An optimal policy consists of a production subsidy on the exportable and an import tariff. This model explains the widespread use of import tariffs on manufactured goods along with production subsidies on the export sectors in many LDCs.

Date: 2001-01-01
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Published in Japanese Economic Review 2001, vol. 52 no. 3, pp. 303-15

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Journal Article: Employment Risk and Optimal Trade Policies (2001)
Working Paper: Employment risk and optimal trade policies (1997)
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Persistent link: https://EconPapers.repec.org/RePEc:isu:genres:5145

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