Previous empirical examinations of the Grossman-Helpman (1994) model raise a puzzle. They find that the weight that the government places on a dollar of welfare loss greatly outweighs a dollar of money contributions. That is, the government is really a welfare maximizer. But this view is at odds...

This paper studies empirically the relationship between trade policy and individual income risk and uses the empirical estimates of this relationship to asses the welfare costs of changes in trade policy. The empirical analysis proceeds in two steps. First, longitudinal data on income of Mexican...