In this paper the welfare effects of tariffs and import quotas in the presence of involuntary unemployment are derived and compared. The framework used is the standard model of a competitive small open economy with many goods and factors. Optimum levels of the respective trade policy instruments...

world, where the two countries (`Europe' and `America') differ in their preferences towards wage inequality. Fair wage considerations compress wage differentials in both countries. European workers are more averse to wage inequality, and Europe is characterized by lower wage differentials and...

Evidence on the effect of product market competition on unionized wages is mixed. In this paper we show theoretically that the result may reflect genuine heterogeneity in the response of union wages to product market conditions. For low levels of unionization, union bargaining power may actually...

While short-run factor intensity reversals lead to industrial shut-downs when there are two productive factors, this paper shows that an industry can undo an intensity reversal over the medium run and avoid shutting down when there are three or more factors. Medium-run adjustment begins with a...

It is shown that a tariff can lower payment to a productive factor used only in (specific to) the protected industry in a simple production model. This may occur anytime the protected sector shares more than one common factor with the rest of the economy, as seems most likely. Intuition based on...