DP376 Labour Adjustment Costs and British Footwear Protection
|Author(s):||L. Alan Winters|
|Publication Date:||February 1990|
|Keyword(s):||Britain, Footwear, Labour Adjustment, Labour Turnover, Non-Tariff Barriers, Profit Function, Protection|
|JEL(s):||422, 631, 824|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=376|
Import protection is frequently advocated as a means of preserving jobs and avoiding labour adjustment costs. Defining adjustment costs in terms of output forgone during the process of adjustment and ignoring any general equilibrium repercussions, we estimate that quantitative restrictions on British footwear imports during 1979 protected about 1,000 jobs and avoided once-and-for-all adjustment costs of only around 1 million pounds sterling. The result is based on new data which reveal high rates of labour turnover in the footwear sector and so imply that displaced labour is readily re-employed. We use a model of output and employment derived from a multi-input, multi-output profit function, which shows that trade restrictions have relatively small effects on UK output and employment.