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Chapter 20: Q. 8 (page 490)

How does the cost of 鈥渟aving鈥� jobs in protected industries compare to the workers鈥� wages and salaries?

Short Answer

Expert verified

It costs more to save the jobs than the actual wages.

Step by step solution

01

Step1. Introduction

With the increased globalization, protectionist policies are necessary. Protectionism essentially means the reduction in the volume of foreign trade and putting a cap and check on it.

Protectionist quotas and tariff policies are needed to ensure the survival of domestic players- the manufacturers and producers till the time they are competition ready.


02

Step2. Explanation

Protectionist steps which are taken to protect the domestic players sometimes generate unwanted results. They adversely affect employment and wages of labor in the industries other than the protected industry. The prices in general may rise in the economy and the laborers irrespective of protected industries or other industries see a decline in their real wage.

The cost hence incurred to provide the protection is actually higher than the actual wages and salaries provided to the laborers of the protected industry.

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Most popular questions from this chapter

What are the gains from competition?

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What are main reasons for protecting 鈥渋nfant industries鈥�? Why is it difficult to stop protecting them?

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Explain how trade barriers save jobs in protected industries, but only by costing jobs in other industries.
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