Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/30061
Authors: 
Gundlach, Erich
de Vaal, Albert
Year of Publication: 
2010
Series/Report no.: 
Kiel Working Paper 1583
Abstract: 
Economists tend to exalt the virtues of free international trade, while politicians are more skeptical. This paper suggests that this is the case because politicians mainly worry about the income distribution effects of trade liberalization, while economists focus on efficiency. Using textbook economic analyses we show that compensating the income distribution effects of free trade may be more complicated and hazardous than is often assumed, at least from a comparative static point of view. Hence politicians may favor trade liberalization only when distributional effects are ignored. By using a multitude of analytical tools and approaches, our paper also makes a useful teaching case for undergraduate students to test and gear their thinking about trade policy issues.
Subjects: 
Trade policy
income distribution
compensation schemes
undergraduate teaching
JEL: 
A20
F13
H20
Document Type: 
Working Paper

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