European Parliament Library

Trade Liberalization and Unemployment, Pierre-Richard Agénor, Joshua Aizenman

Contributor
Abstract
This paper examines the effect of trade reform on wages and unemployment in a two-sector, three-good economy in which labor is imperfectly mobile across sectors. Wages in the export sector are set so as to minimize turnover costs. The analysis shows that a reduction in tariffs, coupled with an adjustment in lump-sum taxes to equilibrate the government budget, lowers wages in all production sectors in the short and the medium run but has an ambiguous effect on unemployment. Although employment and production of exportables expand in the medium run, the unemployment rate may rise or fall depending on whether the elasticity of wages in the export sector with respect to wages in the nontraded goods sector is lower or greater than unity. Potentially adverse effects may be mitigated in the long run, however, as a result of induced shifts in the structure of production activities
Language
eng
Literary Form
non fiction
Note
Bibliographic Level Mode of Issuance: Monograph
Physical Description
1 online resource (38 pages)
Form Of Item
online
Isbn
9781455206063

Library Locations

  • EP Library Strasbourg

    7 Place Adrien Zeller, Allée du Printemps, Strasbourg, F-67070, FR
    Borrow
  • EP Library Brussels

    60 rue Wiertz, Brussels, B-1047, BE
    Borrow
  • EP Library Luxembourg

    Rue du Fort Thüngen, Luxembourg, L-1313, LU
    Borrow