Sub-optimal Tariff Policy and Gains from Trade for LDCs with Urban Unemployment

In this paper we examine the issue of gains from trade in a setting which admits urban unemployment and a variety of urban, labour market conditions. In addition to the conventional criterion, we also consider the case when the size of the urban unemployed is the sole determinant of welfare. The results lean heavily on factor market stability and are sensitive to the commodity being imported and to the assumption of intersectoral mobility of capital.