GEP Research Paper 03/35
Unemployment and the Welfare Effects of Trade Policy
Udo Kreickemeier
Abstract
This paper derives and compares the welfare effects of tariffs and import quotas in the presence of involuntary unemployment. The framework used is the standard model of a competitive small open economy with many goods and factors. Optimum levels of the respective trade policy instruments are derived, as well as welfare increasing reform strategies. In all cases, the labour intensity of the import competing sectors turns out to be a crucial variable for deriving the welfare effects.
Issued in September 2003.
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