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Labor demand andtrade reform in Latin America

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  • Fajnzylber, Pablo
  • Maloney, William F.

Abstract

There are concerns that trade reform and globalization will increase the uncertainty that the average worker, especially the relatively unskilled worker, faces. The increased competitiveness of product markets and greater access to foreign inputs, the argument goes, will lead to more elastic demand for workers. This may have adverse consequences for both labor market volatility and wage dispersion. The authors argue that while the case that trade liberalization should increase own-wage elasticities may be broadly compelling for competitive import-competing industries, it is less so for imperfectly competitive, nontradable, or export industries. They test the hypothesis using establishment-level panel data from three countries with periods of liberalization. The data provide only mixed support for the idea that trade liberalization has an impact on own-wage elasticities. No consistent patterns emerge. If globalization is making the lives of workers more insecure, it is probably working through some other mechanism.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2491.

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Date of creation: 30 Nov 2000
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Handle: RePEc:wbk:wbrwps:2491

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Keywords: Environmental Economics&Policies; Economic Theory&Research; TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT; Inequality; Markets and Market Access;

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  1. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Wiley Blackwell, vol. 58(2), pages 277-97, April.
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  15. Easterly, William & Loayza, Norman & Montiel, Peter, 1997. "Has Latin America's post-reform growth been disappointing?," Policy Research Working Paper Series 1708, The World Bank.
  16. Richard B. Freeman, 1995. "Are Your Wages Set in Beijing?," Journal of Economic Perspectives, American Economic Association, vol. 9(3), pages 15-32, Summer.
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