Trade adjustment assistance for workers

This dissertation examines the impact of the Trade Adjustment Assistance (TAA) program on the post-layoff industrial employment and earnings of workers. TAA provides retraining and extended unemployment benefits to workers who have lost their jobs as a result of increased import competition. These services are intended to increase the reemployment earings of TAA participants and speed their exit from import-competing industries.;The first chapter reviews the history and rationales for a governmental program that treats import-displaced workers differently from other displaced workers.;The second chapter presents a theoretical trade model that illustrates the existence and effects of an adjustment program. A technological improvement abroad decreases the price of foreign exports, encouraging industry-specific labor to leave the import-competing industry in the home country. Since the location of the shock is unknown a priori and workers are risk averse the market devises a transfer scheme, wherein workers in the import-competing industry are compensated during retraining. The adjustment program improves the expected utility of workers and facilitates the transition of labor across industries.;The third chapter estimates a probit equation to investigate whether the program encourages workers to leave their pre-layoff industry, and if differences in the rates of exit are explained by observable personal and pre-layoff job characteristics. It was determined that TAA participants are more likely to enter a new industry than comparable UI recipients. However, the correction for selection bias does not provide conclusive evidence that the program is casual to exit.;The fourth chapter extends the empirical analysis by examining the impact of the program on the post-layoff earnings of participants. Several linear earnings functions provide little evidence that the TAA program had a positive influence on post-layoff wages. Participants experienced greater earnings losses than comparable UI recipients. Selection correction techniques do not reverse the negative findings. The analysis is extended to the proportion of time spent employed. It was determined that TAA participants were employed less on average than comparable UI recipients during the first three years after their initial UI claim.;The fifth chapter concludes with a discussion of the results and suggestions for program improvement.