Gains from trade without lump-sum compensation

Dixit, Avinash; Norman, Victor

doi:10.1016/0022-1996(86)90008-5

Cited by 139 publications

(90 citation statements)

References 6 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…3 That said, if the winners win by more than losers lose, appropriately designed transfers from the winners to the losers can ensure free trade is Pareto improving. Theoretical papers demonstrating this include Dixit and Norman (1986) (using a traditional full employment model) and Feenstra and Lewis (1994) (emphasizing the e¤ects of immobile factors). More recently, Davidson et al (2007) show this in a median voter model with unemployment and costly search and training.…”

Section: Introductionmentioning

confidence: 99%

An empirical analysis of trade-related redistribution and the political viability of free trade

Lake

Millimet

2016

Journal of International Economics

View full text Add to dashboard Cite

Even if free trade creates net welfare gains for a country as a whole, the associated distributional implications can undermine the political viability of free trade. We show that trade-related redistributionas presently constituted -modestly increases the political viability of free trade in the US. We do so by assessing the causal e¤ect of expected redistribution associated with the US Trade Adjustment Assistance program on US Congressional voting behavior on eleven Free Trade Agreements (FTAs) between 2003 and 2011. We …nd that a one standard deviation increase in expected redistribution leads to an average increase in the probability of voting in favor of an FTA of 1.8 percentage points. Although this is a modest impact on average, we …nd signi…cant heterogeneities; in particular, the e¤ect is larger when a representative's constituents are more at risk or the representative faces greater re-election risk.JEL: F13, H50, J65

show abstract

Section: Introductionmentioning

confidence: 99%

An empirical analysis of trade-related redistribution and the political viability of free trade

Lake

Millimet

2016

Journal of International Economics

View full text Add to dashboard Cite

show abstract

“…As a result, w i is independent of the wage tax rate t w . On the one hand, an increasing t w leads to a rise in the union's wage claim [see (11)], which leaves the worker's net wage unchanged. On the other hand, the rising t w implies a reduction in the UB and the net outside wage (1 t 1 ) w j of the same magnitude and consequently the fallback income declines [see (17)].…”

Section: Monopoly Union and Fallback Incomementioning

confidence: 99%

“…10 In line with Melitz (2003), only a fraction of …rms engage in exporting. 11 For i x , …rms are exporters and produce for both the home and foreign markets (I = 1). For i < x , …rms produce for the home market only (I = 0).…”

Section: Unions'membership Vacancy Posting and The Melitz Lotterymentioning

confidence: 99%

See 1 more Smart Citation

Unemployment Benefits as Redistribution Scheme for Trade Gains: A Positive Analysis

Pinto

2012

Contributions to Economics

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Trade liberalization is no Pareto-improvement -there are winners (high-skilled) and losers (low-skilled). To compensate the losers the government is assumed to introduce unemployment benefits (UB). These benefits are financed by either a wage tax, a payroll tax, or a profit tax. Using a Melitz-type model of international trade with unionized labor markets and heterogeneous workers we show that: (i) there is a threshold level of UB where all trade gains are destroyed, (ii) this threshold differs between different kind of taxes, (iii) there is a clearcut ranking in terms of welfare for the chosen funding of the UB: 1. wage tax, 2. profit tax, 3. Payroll tax. Terms of use: Documents in JEL AbstractTrade liberalization is no Pareto-improvement -there are winners (high-skilled) and losers (low-skilled). To compensate the losers the government is assumed to introduce unemployment bene…ts (UB). These bene…ts are …nanced by either a wage tax, a payroll tax, or a pro…t tax. Using a Melitz -type model of international trade with unionized labor markets and heterogeneous workers we show that: (i) there is a threshold level of UB where all trade gains are destroyed, (ii) this threshold di¤ers between di¤erent kind of taxes, (iii) there is a clearcut ranking in terms of welfare for the chosen funding of the UB: 1. wage tax, 2. pro…t tax, 3. payroll tax.JEL-Classi…cation: F1, F16, H2

show abstract

“…However, subsequent papers by Lipsey (1957) and Bhagwati (1971) showed that trade diverting preferential liberalization may nevertheless be welfare improving (with Lipsey arguing that lack of substitution in consumption was necessary for Viner's identification of trade diversion with welfare reduction and Bhagwati arguing that fixity of the level of imports was sufficient instead). As Bhagwati 2 This is a bit of a digression, but I should note that the well-known solution provided by Dixit and Norman (1986) concerning Pareto-gains from trade without lump-sum compensation works in a very similar fashion. In Dixit and Norman's formulation, individual consumption and factor supply vectors with trade are forced to be the same as in autarky (thus guaranteeing individuals the same level of utility as in autarky).…”

mentioning

confidence: 97%

Preferential Trade Agreements

Bagwell¹,

Mavroidis²

2011

View full text Add to dashboard Cite

This volume assembles a stellar group of scholars and experts to examine preferential trade agreements (PTAs), a topic that has time and again attracted the interest of analysts. It presents a discussion of the evolving economic analysis regarding PTAs and the various dysfunctions that continually place them among the priority items for (re)negotiation by the WTO. The book explores recent empirical research that casts doubt on the old 'trade diversion' school and debates why the WTO should deal with PTAs and if PTAs belong under the mandate of the WTO as we now know it.

show abstract

Gains from trade without lump-sum compensation

Cited by 139 publications

References 6 publications

An empirical analysis of trade-related redistribution and the political viability of free trade

An empirical analysis of trade-related redistribution and the political viability of free trade

Unemployment Benefits as Redistribution Scheme for Trade Gains: A Positive Analysis

Preferential Trade Agreements

Contact Info

Product

Resources

About