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- Title
ASPECTS OF UNILATERAL TRADE POLICY AND FACTOR ADJUSTMENT COSTS.
- Authors
Mutti, John
- Abstract
The article presents information on aspects of unilateral trade policy and factor adjustment costs. This article considers to what extent these short-term losses alter the welfare evaluation of free trade policies. A second intent, based on the analytical framework developed to resolve the first point, is to determine when a tariff reduction may be preferable to tariff removal and how such tariff reductions may be effectively carried out over time. This study treats imports and domestic competing goods as imperfect substitutes, and allows for the effects of short-run output price rigidities. Limitations of the analysis are that only unilateral tariff reductions are dealt with empirically, and terms-of-trade effects are ignored. The model is used to evaluate the welfare cost of current tariff barriers for five disaggregated industries, industrial chemicals, iron and others. Attention is focused on four alternative interpretations of the types of adjustment costs that are likely to be incurred. Two possible cases arise from the unemployment of labor due to wage rigidity in the directly impacted domestic industries, versus unemployment in all supplying industries as well.
- Subjects
UNITED States; COMMERCIAL policy; UNITED States economy; BUSINESS cycles; FREE trade; FREE trade policy; COST; TARIFF; INDUSTRIES; UNEMPLOYMENT
- Publication
Review of Economics & Statistics, 1978, Vol 60, Issue 1, p102
- ISSN
0034-6535
- Publication type
Article
- DOI
10.2307/1924338