WAGE SUBSIDY AND WELFARE IN DEVELOPING COUNTRIES |
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| Authors: | HAMID BELADI SAIBAL KAR |
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| Institution: | 1. University of Texas at San Antonio;2. Centre for Studies in Social Sciences, Calcutta and IZA, Bonn |
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| 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. |
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