Abstract
This paper considers the problem of the optimal time path of contraction of an industry which has been hit by foreign competition, and shows that in general, along the optimal path, a production subsidy is warranted. The optimal subsidy trades off the benefit of unemployment in speeding up the approach to the new long-run equilibrium against the cost of lost output in the ‘inefficient’ industry. The dynamic shadow price of labour in this industry is also derived and shown to be always positive, though below the industry wage rate
Item Type: | Journal article |
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Faculties: | Economics > Chairs > Chair of Insurance Sciences (closed) Economics |
Subjects: | 300 Social sciences > 300 Social sciences, sociology and anthropology 300 Social sciences > 330 Economics |
URN: | urn:nbn:de:bvb:19-epub-3412-5 |
ISSN: | 0047-2727 |
Language: | English |
Item ID: | 3412 |
Date Deposited: | 22. Apr 2008, 13:35 |
Last Modified: | 04. Nov 2020, 12:47 |