Trade Adjustment Assistance and Pareto Gains From Trade / Robert C. Feenstra, Tracy R. Lewis.

Format:

Book

Author/Creator:

Feenstra, Robert C.

Contributor:

National Bureau of Economic Research.

Lewis, Tracy R.

Series:

Working Paper Series (National Bureau of Economic Research) no. w3845.

NBER working paper series no. w3845

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1991.

Summary:

In a model where all factors of production are imperfectly mobile, we argue that the Dixit-Norman scheme of commodity taxes may not lead to strict Pareto gains from trade. Rather, this scheme must be augmented by policies which give factors an incentive to move: hence, the role for trade adjustment assistance (TAA). We demonstrate that by knowledge of the distribution of adjustment costs across individuals, the government can offer a single TAA subsidy to all individuals willing to move between industries, and maintain a non-negative budget. The TAA subsidy, combined with the Dixit-Norman pattern of commodity taxes, can lead to Pareto gains from trade under the conditions we identify.

Notes:

Print version record

September 1991.