The Effects of Increasing Openness and Integration to the MERCOSUR on the Uruguayan Labour Market: a CGE Modelling Analysis
AbstractUruguay is a small economy. Its integration into MERCOSUR has increased its exposure to regional macroeconomic instability. The aim of this paper is to assess the impact of regional integration on the country's labour market and poverty. We estimated wage differentials between labour categories, finding a 60 percent wage gap between formal and informal workers. A CGE model with an efficiency wage specification for unskilled labour was built, with results showing that regional shocks deeply affect the Uruguayan economy. The consideration of an efficiency wage model is particularly important when shocks lead to a reallocation of resources towards sectors intensive in unskilled labour. A subsidy on formal, unskilled labour could contribute to decrease informality and therefore increase GDP, but this type of policy needs to be carefully implemented because it may have negative effects on investment. Finally, the effects on poverty and income distribution obtained through microsimulations are consistent with the results of the CGE experiments.
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Bibliographic InfoPaper provided by PEP-MPIA in its series Working Papers MPIA with number 2006-06.
Date of creation: 2006
Date of revision:
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Uruguay; labour market; general equilibrium model; regional itegration; efficiency wage; microsimulation; poverty;
Other versions of this item:
- Maria Inés Terra & Marisa Bucheli & Silvia Laens & Carmen Estrades, 2005. "The effects of increasing openness and integration to the MERCOSUR on the Uruguayan labour market. A CGE modeling analysis," Documentos de Trabajo (working papers) 1205, Department of Economics - dECON.
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
- F15 - International Economics - - Trade - - - Economic Integration
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-04-22 (All new papers)
- NEP-CMP-2006-04-22 (Computational Economics)
- NEP-LAM-2006-04-22 (Central & South America)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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