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International Trade Based on the Ability to Adjust

In: Structural Adjustment in Developed Open Economies

Author

Listed:
  • Peter A. Petri

    (Brandeis University)

Abstract

The recent volatility of international trade and mounting pressures for protection have stimulated new interest in the role of adjustment in trade theory. An excellent cross-section of current research is provided by an NBER volume on import competition and adjustment (Bhagwati, 1982). These essays show that adjustment may be, or may appear to be, costly for several reasons. First, real resources may be required to switch factors of production from one activity to another, as in retraining or retooling.1 Second, adjustment may induce unemployment because of imperfections in factor markets.2 Third, adjustment may be made costly by policy; for example, subsidies to declining industries may raise costs above competitive levels for expanding industries.3

Suggested Citation

  • Peter A. Petri, 1985. "International Trade Based on the Ability to Adjust," International Economic Association Series, in: Karl Jungenfelt & Douglas Hague (ed.), Structural Adjustment in Developed Open Economies, chapter 3, pages 62-87, Palgrave Macmillan.
    • Handle: RePEc:pal:intecp:978-1-349-17919-0_3
    DOI: 10.1007/978-1-349-17919-0_3
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