When Does Trade Hurt? Market, Transition and Developing Economies
AbstractThis paper argues that labor market distortions in transition and developing economies help explain differential impacts of trade liberalization. We assume that workers differ in ability. In a market economy their earnings depend on their ability. However, earnings are independent of ability due to a common wage set in manufacturing in a transition economy and because of family farms in a developing economy. Our work suggests that trade liberalization without structural reform can have serious adverse effects in transition and developing economies: there can even be mutual losses from trade.
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Date of creation: Jun 2002
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Find related papers by JEL classification:
- F16 - International Economics - - Trade - - - Trade and Labor Market Interactions
- O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
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