Winners and loser of trade liberalization: frictions, rigidities and reforms
rade liberalization brings economic gains to the economy due to efficiency improvements and lower prices. The gains, however, may not be for everybody: export sectors win and import sectors lose. This creates a distributional conflict. The gains and losses from trade, and the attendant conflict, evolve as the economy adjusts. This depends on capital and labor market rigidities. There is room for policies to help realize and enhance the gains from trade and to mitigate the losses.
