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Must Improved Labor Standards Hurt Accumulation in an Open Developing Economy? A Structuralist Analysis of the Cambodian Case

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Arslan Razmi () (University of Massachusetts Amherst)
Abstract

Using a modified version of the dependent economy framework, this paper analyzes a stylized small economy that is significantly open to trade and investment flows. The analysis, which is inspired by the structure of Cambodia's economy and ongoing efforts by international organizations to raise labor standards in that country, initially classifies the economy into three sectors: a manufacturing sector that produces tradable goods, a sector that produces (tourism-related) tradable services, and a rural sector that produces non-tradables. By assuming sectoral differences based on stylized facts, we attempt to analyze the consequences of various shocks in a comparative static framework. Furthermore, we evaluate the short- run effects of raising labor standards. Finally, we explore the impact of higher standards in the manufacturing sector on the near- and long-term prospects of the economy using comparative dynamic analysis to analyze changes in output, relative prices, income distribution and accumulation. JEL Categories:

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Paper provided by University of Massachusetts Amherst, Department of Economics in its series Working Papers with number 2008-10.

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Date of creation: Aug 2008
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Handle: RePEc:ums:papers:2008-10

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  2. Brian J. Aitken & Ann E. Harrison, 1999. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," American Economic Review, American Economic Association, vol. 89(3), pages 605-618, June. [Downloadable!] (restricted)
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  4. Blecker, Robert A., 1996. "The new economic integration: Structuralist models of North-South trade and investment liberalization," Structural Change and Economic Dynamics, Elsevier, vol. 7(3), pages 321-345, September. [Downloadable!] (restricted)
  5. Salvador Barrios, . "Foreign Direct Investment and Productivity Spillovers," Working Papers 2000-19, FEDEA. [Downloadable!]
  6. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June. [Downloadable!]
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