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Optimal trade policy, equilibrium unemployment, and labor market inefficiency

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  • Wisarut Suwanprasert

Abstract

Under which circumstances is using trade policies to prevent job losses welfare improving? To answer this question, I incorporate a frictional labor market into the Heckscher–Ohlin model. The results suggest that (a) a country that has an inefficient level of unemployment may experience welfare losses from free trade; (b) having search‐generated unemployment is not sufficient to justify a use of trade policy, because free trade is still optimal when the labor market is constrained‐efficient; and (c) a small country that has an inefficient level of unemployment can use trade policy to improve its welfare.

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  • Wisarut Suwanprasert, 2020. "Optimal trade policy, equilibrium unemployment, and labor market inefficiency," Review of International Economics, Wiley Blackwell, vol. 28(5), pages 1232-1268, November.
    • Handle: RePEc:bla:reviec:v:28:y:2020:i:5:p:1232-1268
    DOI: 10.1111/roie.12492
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    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Optimal Trade Policy, Equilibrium Unemployment and Labor Market Inefficiency
      by Christian Zimmermann in NEP-DGE blog on 2016-05-13 18:00:31

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    Cited by:

    1. Tanapong Potipiti & Wisarut Suwanprasert, 2022. "Why does the WTO treat export subsidies and import tariffs differently?," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 158(4), pages 1137-1172, November.
    2. Tanapong Potipiti & Wisarut Suwanprasert, 2019. "Why Does the WTO Prohibit Export Subsidies But Not Import Tariffs?," PIER Discussion Papers 119, Puey Ungphakorn Institute for Economic Research.
    3. Wisarut Suwanprasert, 2024. "Trade Theory with Behavioral Agents," PIER Discussion Papers 216, Puey Ungphakorn Institute for Economic Research.
    4. Andrew Jonelis & Wisarut Suwanprasert, 2022. "Protection for sale: evidence from around the world," Public Choice, Springer, vol. 191(1), pages 237-267, April.
    5. Suwanprasert, Wisarut, 2017. "A note on “Jobs, Jobs, Jobs: A “New” Perspective on Protectionism” of Costinot (2009)," Economics Letters, Elsevier, vol. 157(C), pages 163-166.

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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
    • F66 - International Economics - - Economic Impacts of Globalization - - - Labor

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