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Article
International Trade, Factor-Market Distortions, and the Optimal Dynamic Subsidy: Reply
The American Economic Review
  • Harvey E. Lapan, Iowa State University
Document Type
Response or Comment
Publication Version
Published Version
Publication Date
12-1-1978
Abstract
James Cassing and Jack Ochs' comment is, I believe, a very interesting extension of the analysis of my paper. Their two basic results are: (i) that congestion will occur in the search for jobs; and (ii) that given costly labor mobility, private decisions regarding voluntary quits will yield a socially optimal adjustment path if individuals have perfect foresight and if there is no congestion (externality) in the search process. Thus, they argue that even if factor prices are not rigid, the presence of congestion in the search process implies private decisions will not be socially optimal, and therefore that a subsidy will be needed to support the optimal plan.
Comments

This is a response of an article from The American Economic Review 68 (1978): 956. Posted with permission.

Copyright Owner
American Economic Association
Language
en
File Format
application/pdf
Citation Information
Harvey E. Lapan. "International Trade, Factor-Market Distortions, and the Optimal Dynamic Subsidy: Reply" The American Economic Review Vol. 68 Iss. 5 (1978) p. 956 - 959
Available at: http://works.bepress.com/harvey-lapan/54/