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A note on “Jobs, Jobs, Jobs: A “New” Perspective on Protectionism” of Costinot (2009)

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  • Suwanprasert, Wisarut

Abstract

In this paper, I re-investigate Costinot (2009) in a more general parameter space. The key insight of this paper is that the reason a small open economy uses trade protections is not because of the existence of search frictions in the labor markets, but the real motivation is from labor market inefficiency. I show that the restricted parameter space considered in Costinot (2009) generates an equilibrium with inefficiently high unemployment compared to the constrained-efficient level of unemployment, and thus trade protections can improve welfare. In the more general parameter space considered in this paper, despite the existence of search frictions in a labor market, free trade can be optimal if the labor market is efficient. In addition, unemployment can be inefficiently low and import subsidies are preferable. The result holds true for standard matching functions.

Suggested Citation

  • Suwanprasert, Wisarut, 2017. "A note on “Jobs, Jobs, Jobs: A “New” Perspective on Protectionism” of Costinot (2009)," Economics Letters, Elsevier, vol. 157(C), pages 163-166.
    • Handle: RePEc:eee:ecolet:v:157:y:2017:i:c:p:163-166
    DOI: 10.1016/j.econlet.2017.05.036
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    References listed on IDEAS

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    1. Arnaud Costinot, 2009. "Jobs, Jobs, Jobs: A "New" Perspective on Protectionism," Journal of the European Economic Association, MIT Press, vol. 7(5), pages 1011-1041, September.
    2. Wisarut Suwanprasert, 2020. "Optimal trade policy, equilibrium unemployment, and labor market inefficiency," Review of International Economics, Wiley Blackwell, vol. 28(5), pages 1232-1268, November.
    3. Arthur J. Hosios, 1990. "On The Efficiency of Matching and Related Models of Search and Unemployment," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 279-298.
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    Cited by:

    1. Tanapong Potipiti & Wisarut Suwanprasert, 2019. "Why Does the WTO Prohibit Export Subsidies But Not Import Tariffs?," PIER Discussion Papers 119, Puey Ungphakorn Institute for Economic Research.
    2. Wisarut Suwanprasert, 2020. "Optimal trade policy, equilibrium unemployment, and labor market inefficiency," Review of International Economics, Wiley Blackwell, vol. 28(5), pages 1232-1268, November.
    3. Wisarut Suwanprasert, 2020. "The role of the most favored nation principle of the GATT/WTO in the New Trade model," Review of International Economics, Wiley Blackwell, vol. 28(3), pages 760-798, August.

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    More about this item

    Keywords

    Optimal trade policy; Unemployment;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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