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The impact of trade liberalization on manufacturing employment and wages in Egypt 1990-2007

  • Said, Mona
  • Elshennawy, Abeer

This paper explores the impact of trade liberalization on manufacturing employment and wages over a period 1993-2006, a period coinciding with significant reduction in trade barriers and rising unemployment. Despite increasing import penetration, the paper shows that employment has increased across all manufacturing industries. Data from Egypt’s labor market survey confirm that layoffs as a result of trade liberalization is not among the factors responsible for unemployment. On the other hand, regression analysis shows that the reduction in tariffs and increasing export orientation has been associated with an increase in wages in manufacturing industries though the role of export orientation in influencing poor wages has not been significant. Meanwhile, quantile regressions reveal that the impact of both the reduction in tariffs and increase in export orientation has not been uniform across the different quantiles of the wage distribution. The paper further points out to the possibility that further reduction of trade barriers might lead to high adjustment costs in terms of long spells of unemployment or lower pay on grounds of old age and low educational attainment of Egypt’s work force. Adjustment policies in the form of direct job search assistance as country experience illustrates is considered to be the most appropriate form of adjustment assistance.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 25759.

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Date of creation: 2010
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Handle: RePEc:pra:mprapa:25759
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  1. Davidson, Carl & Martin, Lawrence & Matusz, Steven, 1999. "Trade and search generated unemployment," Journal of International Economics, Elsevier, vol. 48(2), pages 271-299, August.
  2. Matusz, Steven J, 1996. "International Trade, the Division of Labor, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(1), pages 71-84, February.
  3. Attanasio, Orazio & Goldberg, Pinelopi K. & Pavcnik, Nina, 2004. "Trade reforms and wage inequality in Colombia," Journal of Development Economics, Elsevier, vol. 74(2), pages 331-366, August.
  4. Matusz, Steven J. & Tarr, David, 1999. "Adjusting to trade policy reform," Policy Research Working Paper Series 2142, The World Bank.
  5. Harrison, Ann & Hanson, Gordon, 1999. "Who gains from trade reform? Some remaining puzzles," Journal of Development Economics, Elsevier, vol. 59(1), pages 125-154, June.
  6. Hoekman & Bernard & Winters, L. Alan, 2005. "Trade and employment : stylized facts and research findings," Policy Research Working Paper Series 3676, The World Bank.
  7. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, vol. 46(1), pages 33-50, January.
  8. Lori G. Kletzer, 2001. "Job Loss from Imports: Measuring the Costs," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 110, May.
  9. Pinelopi K. Goldberg & Nina Pavcnik, 2003. "The Response of the Informal Sector to Trade Liberalization," NBER Working Papers 9443, National Bureau of Economic Research, Inc.
  10. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
  11. Revenga, Ana, 1997. "Employment and Wage Effects of Trade Liberalization: The Case of Mexican Manufacturing," Journal of Labor Economics, University of Chicago Press, vol. 15(3), pages S20-43, July.
  12. Puja Vasudeva Dutta, 2004. "Trade Protection and Inter-industry Wages in India," PRUS Working Papers 27, Poverty Research Unit at Sussex, University of Sussex.
  13. Krueger, Alan B & Summers, Lawrence H, 1988. "Efficiency Wages and the Inter-industry Wage Structure," Econometrica, Econometric Society, vol. 56(2), pages 259-93, March.
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