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The US government has created special programs to provide support for those unemployed due to import competition. These programs (Trade Adjustment Assistance and Alternative Trade Adjustment Assistance, or TAA and ATAA respectively) supplement the existing Unemployment Insurance program for those unemployed able to demonstrate that their job loss is due to import competition. The US government has also mandated WARN notices in cases of large unemployment event to provide workers and communities with advance warning of impending transitions.

This paper makes three points about these programs. First, comparison of the incidence of TAA and ATAA petitions and WARN notices in the textiles industry in North Carolina with a comprehensive database of job loss in that state and sector indicates that these are observed in only a minority of candidate plants. Second, the WARN notices and TAA petitions are not coincident: many plants with WARN notices in the period 1995-2007 did not generate TAA petitions, and vice versa. Third, simulation of a micro-founded model of plant-level decision-making in textiles illustrates that unemployment episodes typically will not exhibit the characteristics required for WARN notifications and TAA petitions. The three results taken together suggest reforms to the WARN/TAA system to make it more responsive to the causes of unemployment in this and similar sectors.

by Patrick Conway