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Protection, Openness, and Factor Adjustment: Evidence from the Manufacturing Sector in Uruguay

Listed author(s):
  • Carlos Casacuberta
  • Néstor Gandelman

Using a panel of Uruguayan manufacturing firms we analyze the adjustment process in capital, blue collar, and white collar employment. Adjustment functions are defined with respect to the gap between optimal and actual factor use. Our results confirm the asymmetric nature of factor adjustment, the relevance of nonlinearities, and the interdependence between factor shortages. The average annual estimated desired to actual output gap due to adjustment costs for 1982-95 was 2%. A clear relationship emerges between trade openness and adjustment functions of all three factors. Sectors experiencing stronger trade liberalization adjust less when creating jobs (reducing labor shortages) than sectors with lower changes in tariffs. Also, the larger (in absolute terms) the tariff reductions, the easier it became to adjust when destroying jobs (reducing labor surpluses). Overall the association of higher international exposure with factor adjustment is stronger for blue collar workers than for white collar workers. The results for capital are qualitatively similar but quantitatively smaller.

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File URL: http://dx.doi.org/10.1086/664018
Download Restriction: Access to the online full text or PDF requires a subscription.

File URL: http://dx.doi.org/10.1086/664018
Download Restriction: Access to the online full text or PDF requires a subscription.

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Article provided by University of Chicago Press in its journal Economic Development and Cultural Change.

Volume (Year): 60 (2012)
Issue (Month): 3 ()
Pages: 597-629

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Handle: RePEc:ucp:ecdecc:doi:10.1086/664018
Contact details of provider: Web page: http://www.journals.uchicago.edu/EDCC/

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  1. Gueorgui Kambourov, 2009. "Labour Market Regulations and the Sectoral Reallocation of Workers: The Case of Trade Reforms," Review of Economic Studies, Oxford University Press, vol. 76(4), pages 1321-1358.
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  7. Carlos Casacuberta & Gabriela Fachola & Néstor Gandelman, 2011. "Employment, Capital, And Productivity Dynamics: Evidence From The Manufacturing Sector In Uruguay," The Developing Economies, Institute of Developing Economies, vol. 49(3), pages 266-296, 09.
  8. Carlos Casacuberta & Gabriela Fachola & Nestor Gandelman, 2004. "The impact of trade liberalization on employment, capital, and productivity dynamics: evidence from the uruguayan manufacturing sector," Journal of Economic Policy Reform, Taylor & Francis Journals, vol. 7(4), pages 225-248.
  9. Guiseppe Bertola & Ricardo J. Caballero, 1994. "Irreversibility and Aggregate Investment," Review of Economic Studies, Oxford University Press, vol. 61(2), pages 223-246.
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  17. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-855, December.
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  19. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
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