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Regionalization and Labour Market Rigidities in Developing Countries: A CGE Analysis of UEMOA


  • Decaluwe, Bernard
  • Dissou, Yazid
  • Robichaud, Véronique


In this study, we analyse the impact of the creation of a customs union among UEMOA (Western African Economic and Monetary Union)countries, with a special emphasis on the labour market structure. The implementation of the customs union reform will translate in most of these countries, into a greater openness, even with third party countries. This greater openness raises concerns in these countries as regards its potential impact on welfare, production and employment. In this study, in contrast to many other papers, we relax the assumption of a perfect functioning of the labour market. We consider the presence of a dualism in the labour market and the existence of a minimum wage for the formal workers. We use a multi-country and multi-sectoral computable general equilibrium model (CGE) to assess the impact of the reform. We find that the presence of a minimum nominal wage for the formal workers may significantly reduce the gains stemming from the customs union reform. Our simulation results indicate that the costs induced by this rigidity may exceed 45%, in some cases, in terms of the reduction in the welfare gains obtained without rigidity.

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  • Decaluwe, Bernard & Dissou, Yazid & Robichaud, Véronique, 1999. "Regionalization and Labour Market Rigidities in Developing Countries: A CGE Analysis of UEMOA," Cahiers de recherche 9917, Université Laval - Département d'économique.
  • Handle: RePEc:lvl:laeccr:9917

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    References listed on IDEAS

    1. Fortin, Bernard & Marceau, Nicolas & Savard, Luc, 1997. "Taxation, wage controls and the informal sector," Journal of Public Economics, Elsevier, vol. 66(2), pages 293-312, November.
    2. Agenor, Pierre-Richard & Aizenman, Joshua, 1999. "Macroeconomic adjustment with segmented labor markets," Journal of Development Economics, Elsevier, vol. 58(2), pages 277-296, April.
    3. Shang-Jin Wei & Jeffrey A. Frankel, 1998. "Open Regionalism in a World of Continental Trade Blocs," IMF Staff Papers, Palgrave Macmillan, vol. 45(3), pages 440-453, September.
    4. Milner, Chris & Wright, Peter, 1998. "Modelling Labour Market Adjustment to Trade Liberalisation in an Industrialising Economy," Economic Journal, Royal Economic Society, vol. 108(447), pages 509-528, March.
    5. Devarajan, Shantayanan & Ghanem, Hafez & Thierfelder, Karen, 1997. "Economic Reform and Labor Unions: A General-Equilibrium Analysis Applied to Bangladesh and Indonesia," World Bank Economic Review, World Bank Group, vol. 11(1), pages 145-170, January.
    6. Glenn W. Harrison & Thomas F. Rutherford & David G. Tarr, 2014. "Economic implications for Turkey of a Customs Union with the European Union," World Scientific Book Chapters,in: APPLIED TRADE POLICY MODELING IN 16 COUNTRIES Insights and Impacts from World Bank CGE Based Projects, chapter 16, pages 395-404 World Scientific Publishing Co. Pte. Ltd..
    7. Carlo Perroni & John Whalley, 2000. "The new regionalism: trade liberalization or insurance?," Canadian Journal of Economics, Canadian Economics Association, vol. 33(1), pages 1-24, February.
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    Cited by:

    1. Decaluwé, B. & Dumont, J.-C. & Mesplé-Somps, S. & Robichaud, V., 2000. "Union économique et mobilité des facteurs; le cas de l'Union Économique et Monétaire Ouest Africain (UEMOA)," Cahiers de recherche 0009, Université Laval - Département d'économique.
    2. David Holland & Sanjoy Bhattacharjee & Leroy Stodick, 2006. "Assessing the Economic Impact of Minimum Wage Increases on the Washington Economy: A General Equilibrium Approach," Working Papers 2006-12, School of Economic Sciences, Washington State University.
    3. Ignacio Tavares ARAUJO JUNIOR & Nayana RUTH FIGUEREDO, "undated". "Unions and Economic Inefficiency in Brazil: A CGE Approach," EcoMod2008 23800005, EcoMod.

    More about this item


    Economic integration; Customs union; Labor market; Dualism; Wage rigidity;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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