Abstract for: A Dynamic Model of the Distributional Consequences of International Trade Exposure
This paper presents modeling work in progress that is designed to investigate alternative assumptions about the impacts of international trade exposure on a population in terms of both consumption and labor force participation. One assumption is that public support arises from the benefits that each person should expect to receive from an open domestic market. An alternative assumption is that public support is limited by myopia and linking economic and non-economic issues. The dynamic model is designed on the basis of a standard circular flow model used to explain the circulation of income through the economy. The contribution of this model is to differentiate among producers and households in ways that facilitate testing of political economic theories of distributional consequences of international trade exposure. Specifically, the model will distinguish among households and producers in terms of low versus high human capital. Experiments will be conducted with this model to assess how distributional consequences vary with the ability of household wage earners to acquire human capital. Policy analysis of the model will examine how government intervention could alleviate the distributional consequences of greater trade openness.