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Terms‐of‐Trade Shocks, Labor‐Market Adjustment, and Safeguard Measures
Author(s) -
Gaisford James D.,
Leger Lawrence A.
Publication year - 2000
Publication title -
review of international economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.513
H-Index - 58
eISSN - 1467-9396
pISSN - 0965-7576
DOI - 10.1111/1467-9396.00208
Subject(s) - safeguard , externality , economics , marginal cost , labour economics , microeconomics , international trade
This paper explores a simple model of labor‐market adjustment where intersectoral transfer in response to terms‐of‐trade shocks involves both sector‐specific skill acquisition and workplace disruption. Externalities arise because the marginal migrant does not consider the congestion costs imposed on intramarginal migrants or the disruption costs imposed on the incumbent workers in both sectors. While these externalities give rise to a case for temporary adjustment assistance, the analysis does not support the use of trade measures such as tariffs.