Working Paper: NBER ID: w3071
Authors: James A. Brander; Barbara J. Spencer
Abstract: We analyze the welfare effects of conditional trade adjustment assistance (i.e. assistance that is received only if displaced workers remain unemployed), and compare the conditional program with unconditional assistance. Taking the level of assistance as exogenous, we show that either the conditional or unconditional program may impose greater efficiency costs, depending on underlying parameters. We then introduce an explicit social welfare function and solve for the optimal level of assistance for each program. Finally, we compare the optimized values of the two programs. If the distribution of wage offers is uniform, the unconditional program is welfare superior.
Keywords: trade adjustment assistance; welfare effects; conditional assistance; unconditional assistance
JEL Codes: No JEL codes provided
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| conditional trade adjustment assistance (F16) | welfare outcomes (I38) |
| unconditional trade adjustment assistance (J68) | welfare outcomes (I38) |
| conditional trade adjustment assistance differs from unconditional assistance (J68) | welfare outcomes (I38) |
| type of assistance (F35) | overall welfare outcomes (I31) |
| distribution of wage offers (J31) | type of assistance (F35) |