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Labor markets in an era of adjustment : an overview


  • Horton, Susan
  • Kanbur, Ravi
  • Mazumdar, Dipak


The authors have written an overview of 19 papers in a symposium devoted to an examination of the interaction between labor markets and adjustment. The purpose of their commentary is to draw general conclusions and policy lessons and to identify areas for further research. The papers include 7 issue papers and 12 country studies (Argentina, Brazil, Bolivia, Chile, Costa Rica, Cote d'Ivoire, Egypt, Ghana, Kenya, Korea, Malaysia, and Thailand). The country studies bring together a wealth of information that will be useful to researchers. The evidence on real wages casts considerable doubt on theoretical concerns about aggregate real wage rigidity and labor market inflexibility as a hinderance to adjustment. Declines in real wages have been dramatic and often far greater than the fall in GDP. For some countries, the declines in real wages may have been large enough to have aggregated demand effects that inhibit recovery. The studies also discuss the consequences of labor market adjustment on income distribution, gender, and human capital. The conclusions here are less clear-cut. The issue papers highlight complexities that point to country-specific answers. While real wage declines will worsen poverty, improvement in the rural-urban terms of trade during adjustment will have the opposite effect. Similarly, while employment shrinkages are likely to affect women adversely, a high female-labor intensity of tradables can serve as a countervailing force.

Suggested Citation

  • Horton, Susan & Kanbur, Ravi & Mazumdar, Dipak, 1991. "Labor markets in an era of adjustment : an overview," Policy Research Working Paper Series 694, The World Bank.
  • Handle: RePEc:wbk:wbrwps:694

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    References listed on IDEAS

    1. García, Norberto E. & Tokman, Víctor E., 1984. "Changes in employment and the crisis," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    2. Dutt, Amitava Krishna, 1984. "Stagnation, Income Distribution and Monopoly Power," Cambridge Journal of Economics, Oxford University Press, vol. 8(1), pages 25-40, March.
    3. Levy, Victor & Newman, John L, 1989. "Wage Rigidity: Micro and Macro Evidence on Labor Market Adjustment in the Modern Sector," World Bank Economic Review, World Bank Group, vol. 3(1), pages 97-117, January.
    4. Lindauer, David L & Meesook, Oey Astra & Suebsaeng, Parita, 1988. "Government Wage Policy in Africa: Some Findings and Policy Issues," World Bank Research Observer, World Bank Group, vol. 3(1), pages 1-25, January.
    5. Krugman, Paul & Taylor, Lance, 1978. "Contractionary effects of devaluation," Journal of International Economics, Elsevier, vol. 8(3), pages 445-456, August.
    6. Cardoso, Eliana A., 1980. "Minidevaluations and indexed wages : The Brazilian experience in the seventies," Journal of Development Economics, Elsevier, vol. 7(4), pages 453-465, December.
    7. Fallon, Peter R. & Riveros, Luis A., 1989. "Adjustment and the labor market," Policy Research Working Paper Series 214, The World Bank.
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