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On the employment, investment, and current account effects of trade liberalizations with durability in consumption

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  • Mansoorian, Arman
  • Mohsin, Mohammed

Abstract

The effects of trade liberalizations are studied for a small open economy in a model with durable goods. A trade liberalization increases the permanent income of the representative agent, because it removes trade distortions. The increase in permanent income leads to a corresponding increase in the steady state stock of durable goods, and a fall in labor supply. The fall in labor input reduces investment, which tends to generate a current account surplus. To increase the stock of durables savings falls, which tend to generate a current account deficit. The adjustment of the current account will likely be non-monotonic.

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  • Mansoorian, Arman & Mohsin, Mohammed, 2010. "On the employment, investment, and current account effects of trade liberalizations with durability in consumption," The North American Journal of Economics and Finance, Elsevier, vol. 21(3), pages 228-240, December.
    • Handle: RePEc:eee:ecofin:v:21:y:2010:i:3:p:228-240
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