The Effect Of Trade Liberalization On Informality And Wages
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The Effect Of Trade Liberalization On Informality And Wages
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Author : Benjamin Aleman-Castilla
language : en
Publisher:
Release Date : 2006
The Effect Of Trade Liberalization On Informality And Wages written by Benjamin Aleman-Castilla and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2006 with Free trade categories.
This paper studies the impact of NAFTA on informality and real wages in Mexico. Using a dynamic industry model with firm heterogeneity, it is predicted that import tariff elimination could reduce the incidence of informality by making more profitable to some firms to enter the formal sector, forcing the less productive informal firms to exit the industry, and inducing the most productive formal firms to engage in trade. The model also predicts market share reallocations towards the most productive firms, and an increase in real wages due to the increased labour demand by these firms. Using data on Mexican and U.S. import tariffs together with the Mexican National Survey of Urban Labour (ENEU), I find that reductions in the Mexican import tariffs are significantly related to reductions in the likelihood of informality in the tradable industries. I also find that informality decreases less in industries with higher levels of import penetration, while it decreases more in industries that are relatively more export oriented. Finally, I confirm that the elimination of the Mexican import tariffs is related to an increase in real wages, and that the elimination of the U.S. import tariff has contributed to the expansion of the formal-informal wage differentials.
Heterogeneous Firms And Informality
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Author : Dennis Becker
language : en
Publisher:
Release Date : 2014
Heterogeneous Firms And Informality written by Dennis Becker and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
The informal sector is often seen as a coping mechanism for firms that choose to evade registration fees or pay low wages. In this paper, I investigate the role of the informal sector in the impact of trade liberalization on welfare, employment and wage inequality in a model of trade with heterogeneous firms. The findings suggest that trade liberalization reduces informal employment unambiguously. Contrary to the extant literature, however, its impact on welfare, total employment and wage inequality is country-specific.
Trade And Employment
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Author : Bernard M. Hoekman
language : en
Publisher: World Bank Publications
Release Date : 2005
Trade And Employment written by Bernard M. Hoekman and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2005 with Commerce categories.
"The substantial literature investigating the links between trade, trade policy, and labor market outcomes-both returns to labor and employment-has generated a number of stylized facts, but many open questions remain. This paper surveys the subset of the literature focusing on trade policy and integration into the world economy. Although in the longer run trade opportunities can have a major impact in creating more productive and higher paying jobs, this literature tends to take employment as given. A common finding is that much of the shorter run impacts of trade and reforms involve reallocation of labor or wage impacts within sectors. This reflects a pattern of expansion of more productive firms-especially export-oriented or suppliers to exporters-and contraction and adjustment of less productive enterprises in sectors that become subject to greater import competition. Wage responses to trade and trade reforms are generally greater than employment impacts, but trade can only explain a small fraction of the general increase in wage inequality observed in both industrial and developing countries in recent decades. A feature of the literature survey is that the focus is almost exclusively on industries producing goods. Given the importance of service industries as a source of employment and determinants of competitiveness, the paper argues that one priority area for future research is to study the employment effects of services trade and investment reforms. "--World Bank web site.
Heterogeneous Firms Informality And Trade Liberalization
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Author : Dennis Becker
language : en
Publisher:
Release Date : 2015
Heterogeneous Firms Informality And Trade Liberalization written by Dennis Becker and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
The dissertation explores the impact of trade liberalization on heterogeneous firms in the presence of informality. In the first paper, I investigate the role of the informal sector in the impact of trade liberalization on welfare, employment and wage inequality in a model of trade with heterogeneous firms. The findings suggest that trade liberalization reduces informal employment unambiguously. Contrary to the extant literature, however, its impact on welfare, total employment and wage inequality is country-specific. The second paper introduces product-level regulation as new driver of informality in a model of heterogeneous multi-product firms and endogenous product choice, where firms face regulation at both firm- and product-level and may comply with or evade either. The model suggests that firmlevel regulation causes informality by deterring firm registration. However, product-level regulation has two effects: it directly drives product informality within the formal sector as evasion of product regulation and indirectly deters firms from registering. When considering product-revenue distribution, formal firms are less diversified than informal firms, which implies that the formalization of economies may entail welfare loses due to decreased product diversity. The third paper studies trade liberalization, informality and corruption. Informality is commonly seen as response to regulations and weak institutions. Yet, regulatory changes, such as trade liberalization, and institutions interact, rendering their joint effect on formality ambiguous. I therefore study the impact of trade liberalization on firm formality in a model of heterogeneous firms and endogenous corruption. The model suggests that a higher entry cost to the formal sector, entailing more corruption, and trade liberalization decrease formality. However, as trade liberalization reduces corruption, the formal sector is less responsive to trade in economies with higher entry cost, hampering the selection effect of trade. An instrumental variable panel data analysis on Vietnamese SME surrounding Vietnam's WTO accession confirms the predictions.
Trade Protection And Wages
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Author : Pinelopi Koujianou Goldberg
language : en
Publisher:
Release Date : 2001
Trade Protection And Wages written by Pinelopi Koujianou Goldberg and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with Economics categories.
Starting in 1985, Colombia experienced gradual trade liberalization that culminated in the drastic tariff reductions of 1990-91. This paper exploits these trade reforms to investigate the relationship between protection and wages. The focus of the analysis is on relative wages, defined as industry wage premiums relative to the economy-wide average wage. Using the June waves of the Colombian National Household Survey, we first compute wage premiums for the period 1984-98, adjusting for a series of worker characteristics, job and firm attributes, and informality. We find that industry wage premiums in Colombia exhibit remarkably less persistence over time than U.S. wage premiums. Similarly, measures of trade protection are less correlated over time than in the U.S. data, indicating that as a result of trade liberalization the structure of protection has changed. Regressions of wage premiums on tariffs, without industry fixed effects, produce a negative relationship between protection and wages; workers in protected sectors earn less than workers with similar observable characteristics in unprotected sectors. With fixed effects the results are reversed: Trade protection is found to increase relative wages. The effect is economically significant: Elimination of tariffs in an industry with an average level of protection in 1984 would lead to a 4% wage decline in this industry. For the most protected industries the effect increases to 7.3%. We also find that - in contrast to the U.S. - sectors with high import penetration in Colombia pay higher wages; nevertheless, regressions with industry fixed effects indicate that an increase of imports in a particular sector is associated with lower wages. The differences between the results with and without fixed effects are indicative of the importance of (time-invariant) political economy factors as determinants of protection. Further issues concerning the effects of trade liberalization, such as the relevance of time-variant political economy factors, the importance of employment guarantees, liberalization induced productivity changes, and the interplay of trade and labor reforms, will be investigated in a sequel paper.
The Response Of The Informal Sector To Trade Liberalization
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Author : Pinelopi Koujianou Goldberg
language : en
Publisher:
Release Date : 2003
The Response Of The Informal Sector To Trade Liberalization written by Pinelopi Koujianou Goldberg and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Economics categories.
This paper studies the relationship between trade liberalization and informality. It is often claimed that increased foreign competition in developing countries leads to an expansion of the informal sector, defined as the sector that does not comply with labor market legislation. Using data from two countries that experienced large trade barrier reductions in the 1980's and 1990's, Brazil and Colombia, we examine the response of the informal sector to liberalization. In Brazil, we find no evidence of a relationship between trade policy and informality. In Colombia, we do find evidence of such a relationship, but only for the period preceding a major labor market reform that increased the flexibility of the Colombian labor market. These results point to the significance of labor market institutions in assessing the effects of trade policy on the labor market.
Sticky Feet
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Author : Claire H. Hollweg
language : en
Publisher: World Bank Publications
Release Date : 2014-06-26
Sticky Feet written by Claire H. Hollweg and has been published by World Bank Publications this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014-06-26 with Business & Economics categories.
The analysis in this report confirms the findings of previous studies that trade liberalization improves aggregate welfare and is in the long run associated with higher employment and wages. The analysis addresses a major gap in the literature, which has heretofore provided limited evidence about the trade-related adjustment costs faced by workers in developing countries and how they are affected by mobility costs. Labor market frictions reduce the potential gains from trade reform. For a tariff reduction in a given sector, the resulting change in relative prices raises real wages in some sectors and reduces them in the liberalized sector. The emerging wage gaps lead to labor reallocation. But workers typically incur costs to change jobs; the higher the mobility costs, the slower the transition to the new labor market steady state. Workers’ sticky feet result in foregone welfare gains from trade. This report presents an estimation strategy for capturing mobility costs when only net flows of workers between industries are observed, generating cross-country estimates for 47 developed and developing countries. The basic analytical approach is then refined to take advantage of micro-level data on worker transitions and wages when gross flows can be observed to derive mobility cost estimates that account for sector and formality status. These cost estimates are used to model the dynamic paths of labor reallocation between sectors and in and out of the labor force, the associated wage paths, and the resulting labor adjustment costs. The main findings of the report are that: labor mobility costs in developing countries are high; foregone trade gains due to frictions in labor mobility can also be substantial; workers bear the brunt of adjustment costs; mobility costs and labor market adjustments to trade-related shocks vary by industry, firm type, and worker type; entry costs are significantly higher for formal than for informal employment; trade reforms increase economy-wide wages and employment; and workers displaced by plant closings are likely to face relatively long adjustment periods. The findings provide insights that could be helpful to policymakers hoping to mitigate negative short-term consequences of trade liberalization and facilitate labor adjustment.
Trade Liberalization And India S Informal Economy
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Author : Barbara Harris-White
language : en
Publisher:
Release Date : 2007
Trade Liberalization And India S Informal Economy written by Barbara Harris-White and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with Business & Economics categories.
Papers presented at a workshop held in 2004.
Trade Wages And The Political Economy Of Trade Protection
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Author : Pinelopi Koujianou Goldberg
language : en
Publisher:
Release Date : 2003
Trade Wages And The Political Economy Of Trade Protection written by Pinelopi Koujianou Goldberg and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Colombia categories.
Globalization And Poverty
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Author : Ann Harrison
language : en
Publisher: University of Chicago Press
Release Date : 2007-11-01
Globalization And Poverty written by Ann Harrison and has been published by University of Chicago Press this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007-11-01 with Business & Economics categories.
Over the past two decades, the percentage of the world’s population living on less than a dollar a day has been cut in half. How much of that improvement is because of—or in spite of—globalization? While anti-globalization activists mount loud critiques and the media report breathlessly on globalization’s perils and promises, economists have largely remained silent, in part because of an entrenched institutional divide between those who study poverty and those who study trade and finance. Globalization and Poverty bridges that gap, bringing together experts on both international trade and poverty to provide a detailed view of the effects of globalization on the poor in developing nations, answering such questions as: Do lower import tariffs improve the lives of the poor? Has increased financial integration led to more or less poverty? How have the poor fared during various currency crises? Does food aid hurt or help the poor? Poverty, the contributors show here, has been used as a popular and convenient catchphrase by parties on both sides of the globalization debate to further their respective arguments. Globalization and Poverty provides the more nuanced understanding necessary to move that debate beyond the slogans.