Wage Subsidy and Welfare in Developing Countries

15 Pages Posted: 20 Jun 2011

See all articles by Hamid Beladi

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics

Saibal Kar

Centre for Studies in Social Sciences, Calcutta; Institute of Labor Economics (IZA)

Date Written: July 2011

Abstract

This paper seeks to answer if wage subsidy to workers displaced due to trade reform raises welfare in a developing country. We use a general equilibrium model with non‐specific factor inputs and trade liberalization as a policy variable. A combination of wage subsidy and tariff rate obtains the second‐best welfare level. The theoretical result is new, policy‐relevant and important in view of political‐economy aspects of free trade in developing and transition countries.

Suggested Citation

Beladi, Hamid and Kar, Saibal, Wage Subsidy and Welfare in Developing Countries (July 2011). Economics & Politics, Vol. 23, Issue 2, pp. 239-253, 2011. Available at SSRN: https://ssrn.com/abstract=1866057 or http://dx.doi.org/10.1111/j.1468-0343.2011.00383.x

Hamid Beladi

University of Texas at San Antonio - College of Business - Department of Economics ( email )

One UTSA Circle
P.O. Box 5636
San Antonio, TX 78249
United States
210-458-7038 (Phone)
210-458-7040 (Fax)

Saibal Kar

Centre for Studies in Social Sciences, Calcutta ( email )

R-1, Baishnabghata Patuli Township
Calcutta, 700 094
India
91-33-2462 7252 (Phone)
91-33-2462 6183 (Fax)

HOME PAGE: http://www.cssscal.org

Institute of Labor Economics (IZA) ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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