Positive and normative aspects of trade policy are examined when firms offer incentive pay to workers, such as piece-rate pay and profit sharing, to deal with worker moral hazard. Protection increases the incentive pay rate. Its effect on effort depends upon the degree of labor mobility and the...

The paper examines the optimal pollution standard for a large open economy. Using a two-country partial-equilibrium framework, the optimal standards are characterized for autarky, free trade, and free trade together with cooperation among countries in setting standards. If pollution is local, at...