Working Paper: NBER ID: w3346
Authors: Sebastian Edwards; Alejandra Cox Edwards
Abstract: The purpose of this paper is to provide a typology of different labor market configurations and investigate how two major structural adjustment policies, namely a trade liberalization reform and the relaxation of capital controls, affect the level of aggregate employment and the rate of unemployment. We consider a number of models starting from the traditional Australian approach. We then analyze a multiple sectors intertemporal setting and a model with uncertainty and search. We identify situations under which structural adjustment results in unemployment.
Keywords: Labor Market; Structural Adjustment; Trade Liberalization; Capital Controls
JEL Codes: J64; F13; O19
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Reduction of tariffs (F13) | Decrease in import prices (F14) |
| Decrease in import prices (F14) | Labor allocation (J29) |
| Labor allocation (J29) | Increased unemployment (J64) |
| Reduction of tariffs (F13) | Increased unemployment (J64) |