Fears of rising wage inequality and job loss loom large in current debates on free trade. Surprisingly, however, there … exists little academic research on how to compensate those who lose from free trade. This policy paper reviews the existing … theoretical literature on trade and compensation, and derives guidelines on how to design compensation schemes in practice. The …

trade liberalization on wage inequality. In the context of a dynamic trade model with costly labour mobility (Lechthaler and … Mileva, 2013), we show that the effect of trade liberalization on wage inequality depends on i) the time horizon considered …, ii) the degree of worker mobility, and iii) the degree of trade liberalization (partial/full). In the short-run, observed …