Import Competition in the High-Wage Sector and Trade Policy Effects on Labor
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Fields, Gary S.; Grinols, Earl L.
This article evaluates the employment and welfare effects of increased trade competition and protection in economies with wage dualism, unemployment, and on-the-job search. A micro-based measure of economy welfare distinguishes between workers and other sectors of the economy is developed to deal with labor market imperfections and distributional issues. For example, increased competition in high-wage sector goods reduces high-wage employment, but may or may not increase overall unemployment. Policy may be chosen to mitigate loss in worker earnings that are partly or wholly offset by gains to consumers of the importable.
imports; high-wage sector; trade policy; welfare effects; labor market
Required Publisher Statement: © University of Illinois at Urbana-Champaign. Final version published as: Fields, G. S., & Grinols, E. A. (1991). Import competition in the high-wage sector and trade policy effects on labor. Quarterly Review of Economics and Business, 31(2), 33-56. Reprinted with permission. All rights reserved.