Trade Adjustment Assistance: Welfare and Incentive Effects of Payments to Displaced Workers

26 Pages Posted: 16 Jul 2004

See all articles by James A. Brander

James A. Brander

University of British Columbia (UBC) - Sauder School of Business

Barbara J. Spencer

University of British Columbia (UBC) - Sauder School of Business; National Bureau of Economic Research (NBER)

Date Written: August 1989

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.

Suggested Citation

Brander, James A. and Spencer, Barbara J., Trade Adjustment Assistance: Welfare and Incentive Effects of Payments to Displaced Workers (August 1989). NBER Working Paper No. w3071. Available at SSRN: https://ssrn.com/abstract=463495

James A. Brander (Contact Author)

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8483 (Phone)
604-822-8477 (Fax)

Barbara J. Spencer

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada
604-822-8479 (Phone)
604-822-8477 (Fax)

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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