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Preferential trade agreements and the labor market

Ornelas, Emanuel ORCID: 0000-0001-8330-8745 (2012) Preferential trade agreements and the labor market. CEP Discussion Papers (CEPDP1117). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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Labor market consequences are at the forefront of most debates on the merits of trade liberalization. Preferential trade agreements (PTAs) have become the primary form of trade liberalization in most countries, and several studies have shown that discriminatory and nondiscriminatory trade liberalization can lead to very different outcomes. Yet to date there has not been any attempt to study the specific labor market implications of preferential liberalization. In this article I argue that the labor market consequences of unilateral or multilateral non-discriminatory trade liberalization and those stemming from integration in the context of PTAs can indeed be quite distinct, and therefore the latter must be given closer scrutiny. I provide a short summary of both the theoretical literature on trade and the labor market and the literature on preferential liberalization. Relying on the insights from those two—largely independent—lines of research, I then discuss why liberalization through PTAs can have consequences for the labor market that are considerably different from the effects of lowering trade barriers in a non-discriminatory fashion. Examples of areas where those differences are likely to be meaningful include the nature of labor market adjustment costs, the incentives for firms to start exporting, and the effects on “job rents.”

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2012 The Author(s)
Divisions: Management
Subjects: H Social Sciences > HC Economic History and Conditions
JEL classification: F - International Economics > F1 - Trade > F16 - Trade and Labor Market Interactions
F - International Economics > F1 - Trade > F15 - Economic Integration
F - International Economics > F1 - Trade > F13 - Commercial Policy; Protection; Promotion; Trade Negotiations; International Trade Organizations
Date Deposited: 22 Feb 2024 12:57
Last Modified: 16 May 2024 12:34

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