Working Paper: CEPR ID: DP376
Authors: Wendy E. Takacs; L. Alan Winters
Abstract: Import protection is frequently advocated as a means of preserving jobs and avoiding labour adjustment costs. Defining adjustment costs in terms of output forgone during the process of adjustment and ignoring any general equilibrium repercussions, we estimate that quantitative restrictions on British footwear imports during 1979 protected about 1,000 jobs and avoided once-and-for-all adjustment costs of only around 1 million pounds sterling. The result is based on new data which reveal high rates of labour turnover in the footwear sector and so imply that displaced labour is readily re-employed. We use a model of output and employment derived from a multi-input, multi-output profit function, which shows that trade restrictions have relatively small effects on UK output and employment.
Keywords: protection; labour adjustment; nontariff barriers; labour turnover; profit function; footwear; britain
JEL Codes: 422; 631; 824
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Import restrictions (F14) | Avoided adjustment costs (D61) |
| Import restrictions (F14) | Protected jobs (J68) |
| Abolishing non-tariff barriers in 1979 (F13) | Displacement of workers (J63) |
| High turnover rates (J63) | Shorter adjustment period (F32) |
| 5% turnover rate (J63) | Longer adjustment period (C41) |
| High turnover rates (J63) | Lower adjustment costs (D23) |
| Low turnover rates (J63) | Higher adjustment costs (J32) |