Distributional effects of the Panama Canal expansion
AbstractThis paper uses a dynamic macro-micro framework to evaluate the potential distributional effects of the expansion of the Panama Canal. The results show that large macroeconomic effects are only likely during the operations phase (2014 and onward), and income gains are likely to be concentrated at the top of the income distribution. The additional foreign exchange inflows during the construction and operations phases result in the loss of competitiveness of non-Canal sectors (Dutch disease) and in higher domestic prices, which hurt the poorest consumers. In addition, the construction and operation activities increase demand for more educated non-farm formal workers. Although these changes encourage additional labor movement out of agriculture and from the informal to the formal sector, much of the impact is manifested in growing wage disparities and widening income inequality. Using the additional revenues of the Canal expansion in a targeted cash transfer program such as"Red de Oportunidades", the Government of Panama could offset the adverse distributional effects and eradicate extreme poverty.
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Bibliographic InfoPaper provided by The World Bank in its series Policy Research Working Paper Series with number 5848.
Date of creation: 01 Oct 2011
Date of revision:
Economic Theory&Research; Labor Policies; Markets and Market Access; Labor Markets; Emerging Markets;
Other versions of this item:
- Maurizio Bussolo & Rafael de Hoyos & Denis Medvedev, 2012. "Distributional Effects of the Panama Canal Expansion," Journal of LACEA Economia, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
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