Arbeitspapier
Smoothing the adjustment to trade liberalization
We use a dynamic general equilibrium trade model with comparative advantage, heterogeneous firms, heterogeneous workers and endogenous firm entry to analyze economic policy to compensate the losers of trade liberalization and to reduce the ensuing wage inequality. We consider several instruments of economic policy: a wage tax to redistribute income between skilled and unskilled workers; sector-specific consumption taxes and profit taxes to affect inter-sectoral wage inequality; sector-specific firm entry subsidies, worker sector-migration subsidies and training subsidies to speed up the adjustment process. We find that the re-distributional and efficiency effects of these instruments differ very much. Probably the most potent tool to reduce the wage inequality after trade liberalization are training subsidies. Although the policy also generates inefficiencies because too many workers are trained, the costs of these inefficiencies are relatively low.
- Language
-
Englisch
- Bibliographic citation
-
Series: WWWforEurope Working Paper ; No. 61
- Classification
-
Wirtschaft
Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
Neoclassical Models of Trade
Trade and Labor Market Interactions
Job, Occupational, and Intergenerational Mobility; Promotion
- Subject
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Trade liberalization
wage inequality
adjustment dynamics
re-distribution
- Event
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Geistige Schöpfung
- (who)
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Lechthaler, Wolfgang
Mileva, Mariya
- Event
-
Veröffentlichung
- (who)
-
WWWforEurope
- (where)
-
Vienna
- (when)
-
2014
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Lechthaler, Wolfgang
- Mileva, Mariya
- WWWforEurope
Time of origin
- 2014
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