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Consequences of trade liberalization on the labor market in developing economy : The case of Tunisia

Author

Listed:
  • Ilham Haouas

    (Ced-Team - University of Paris 1)

  • Mahmoud Yagoubi

    (Crifes-Matisse - University of Paris 1)

Abstract

This paper investigates short and long run effects of trade liberalization on employment and wages using a specific factor trade model. Employment and wage equations areestimated using data (1971-1996) for importable and exportable sectors in Tunisia. Results fromempirical testing using the model find some supports for the theoretical predictions of Edwards(1988) for the exportable sector. On the other hand, in the importable sectors, we find resultsthat are opposed to those predicted by Edwards (1988) since employment and wages increase. Apossible reason for the divergence of theory and practice is that the Edward's model is premisedon the basis of a fixed supply of labour. Exportable employment could therefore only rise ifimportable employment fell. However, as we have seen, the supply of labour increaseddramatically in Tunisia as women entered the labour market. This allowed employment inimportable to be maintained (even slightly increase) as the exportable sector expanded.

Suggested Citation

  • Ilham Haouas & Mahmoud Yagoubi, 2001. "Consequences of trade liberalization on the labor market in developing economy : The case of Tunisia," Documents de travail 64, Groupe d'Economie du Développement de l'Université Montesquieu Bordeaux IV.
  • Handle: RePEc:mon:ceddtr:64
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    References listed on IDEAS

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    1. Mussa, Michael, 1978. "Dynamic Adjustment in the Heckscher-Ohlin-Samuelson Model," Journal of Political Economy, University of Chicago Press, vol. 86(5), pages 775-791, October.
    2. John M. Abowd & Thomas Lemieux, 1991. "The Effects of International Competition on Collective Bargaining Outcomes: A Comparison of the United States and Canada," NBER Chapters,in: Immigration, Trade, and the Labor Market, pages 343-367 National Bureau of Economic Research, Inc.
    3. 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.
    4. Arulampalam, W. & Robin A. Naylor & Jeremy P. Smith, 2002. "University of Warwick," Royal Economic Society Annual Conference 2002 9, Royal Economic Society.
    5. Richard A. Brecher, 1974. "Minimum Wage Rates and the Pure Theory of International Trade," The Quarterly Journal of Economics, Oxford University Press, vol. 88(1), pages 98-116.
    6. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    More about this item

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General

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