Article Sidebar

Submitted
August 11, 2023
Accepted
October 23, 2023
Published
October 31, 2023
Download
Full Text PDF
Statistic
Read Counter : 465 Download : 836

Downloads

Download data is not yet available.

Main Article Content

Abstract

Purpose ― In the present study, the effects of labor market distortions on economic structure and efficiency are estimated for seven emerging-market countries: Brazil, China, Indonesia, India, Mexico, Russia, and Turkey.
Methods ― The estimates are based on a computable equilibrium (CGE) model that allows simulation of the inter-industry links of 56 industries plus a sector representing the rest of the world from data collected in the World Input-Output Database (Release 2016) for the period 2000-2014.
Findings ― The results show that wage differentials appear to be distortionary, especially in the cases of countries with high wage-income inequality. Moreover, it seems that labor market distortions in emerging-market countries are subject to the rural-urban dichotomy and urban labor-market imperfections. Finally, the results show that the removal of wage differentials affects the terms of trade, which are improved in most but not all cases.
Implication ― The conclusions of the present study have policy implications. In countries where the rural-urban dichotomy is the main distortion in labor markets, increasing urbanization can stimulate efficiency; when this is not the case, further reform of urban labor markets is needed. However, it cannot be ruled out in advance that a policy aimed at enhancing labor mobility may have a negative impact on the terms of trade.
Originality ― The estimation method used in the present study presents certain advances over others found in the literature, as it becomes possible to estimate the effects of labor-market distortions while considering the interdependencies between different sectors, as well as to plausibly estimate the effects on trade. The present study also uses a large quantity of data, which is expected to add robustness to the study’s conclusion.

Keywords

Emerging Markets labour market distortions input-output Computable General Equilibrium (CGE) Model

Article Details

License

Copyright (c) 2023 Pablo R. Liboreiro

Creative Commons License

This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Authors who publish with this journal agree to the following terms:

  1. Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Creative Commons Attribution-ShareAlike 4.0 International License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
  2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
  3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See The Effect of Open Access).

Creative Commons License

Economic Journal of Emerging Markets by Center for Economic Studies, Universitas Islam Indonesia is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

How to Cite
Liboreiro, P. R. (2023). Labor market distortions in major emerging-market economies: Some CGE estimates. Economic Journal of Emerging Markets, 15(2), 129–142. https://doi.org/10.20885/ejem.vol15.iss2.art2
Download Citation
Endnote/Zotero/Mendeley (RIS)
BibTeX

References

  1. Aoki, S. (2012). A simple accounting framework for the effect of resource misallocation on aggregate productivity. Journal of the Japanese and International Economies, 26(4), 473–494. https://doi.org/10.1016/j.jjie.2012.08.001
  2. Arrow, K. J., & Hahn, F. (1971). General competitive analysis. Holden-Day, Inc.
  3. Bartelsman, E., Haltiwanger, J., & Scarpetta, S. (2013). Cross-country differences in productivity: The role of allocation and selection. American Economic Review, 103(1), 305–334. https://doi.org/10.1257/aer.103.1.305
  4. Bento, P., & Restuccia, D. (2017). Misallocation, establishment size, and productivity. American Economic Journal: Macroeconomics, 9(3), 267–303. https://doi.org/10.1257/mac.20150281
  5. Bhagwati, J. N. (1968). Distortions and immiserizing growth: A generalization. The Review of Economic Studies, 35(4), 481. https://doi.org/10.2307/2296774
  6. Bhagwati, J., & Ramaswami, V. K. (1963). Domestic distortions, tariffs and the theory of optimum subsidy. Journal of Political Economy, 71(1), 44–50. https://doi.org/10.1086/258733
  7. Broda, C., & Weinstein, D. E. (2006). Globalization and the gains from variety. The Quarterly Journal of Economics, 121(2), 541–585. https://doi.org/10.1162/qjec.2006.121.2.541
  8. de Melo, J. A. P. (1977). Distortions in the factor market: Some general equilibrium estimates. The Review of Economics and Statistics, 59(4), 398. https://doi.org/10.2307/1928704
  9. Dietzenbacher, E., Lenzen, M., Los, B., Guan, D., Lahr, M. L., Sancho, F., Suh, S., & Yang, C. (2013). Input-output analysis: The next 25 years. Economic Systems Research, 25(4), 369–389. https://doi.org/10.1080/09535314.2013.846902
  10. Emran, M. S., & Shilpi, F. (2010). Estimating an import demand function in developing countries: A structural econometric approach with applications to India and Sri Lanka. Review of International Economics, 18(2), 307–319. https://doi.org/10.1111/j.1467-9396.2010.00865.x
  11. Faini, R., Pritchett, L., & Clavijo, F. (1988). Import demand in developing countries. Policy Research Working Paper Series No. 122, The World Bank.
  12. Fishlow, A., & David, P. A. (1961). Optimal resource allocation in an imperfect market setting. Journal of Political Economy, 69(6), 529–546. https://doi.org/10.1086/258574
  13. Freeman, R. B., & Oostendorp, R. H. (2002). Wages around the world: Pay across occupations and countries. In R.B. Freeman (Ed.), Inequality around the world. Palgrave Macmillan. https://doi.org/10.1007/978-1-137-09971-6_2
  14. Günther, I., & Launov, A. (2012). Informal employment in developing countries. Journal of Development Economics, 97(1), 88–98. https://doi.org/10.1016/j.jdeveco.2011.01.001
  15. Hendel, I., & Nevo, A. (2006). Measuring the implications of sales and consumer inventory behavior. Econometrica, 74(6), 1637–1673. https://doi.org/10.1111/j.1468-0262.2006.00721.x
  16. Hong, P. (2001). Import elasticities revisited. DESA Discussion Paper No. 10. https://doi.org/10.2139/ssrn.288599
  17. Hopenhayn, H. A. (2014). Firms, misallocation, and aggregate productivity: A review. Annual Review of Economics, 6(1), 735–770. https://doi.org/10.1146/annurev-economics-082912-110223
  18. Hsieh, C.-T., & Klenow, P. J. (2009). Misallocation and manufacturing TFP in China and India *. Quarterly Journal of Economics, 124(4), 1403–1448. https://doi.org/10.1162/qjec.2009.124.4.1403
  19. Jha, P., & Hasan, R. (2022). Labor market policies, informality and misallocation. Indian Growth and Development Review, 15(1), 18–59. https://doi.org/10.1108/IGDR-05-2021-0067
  20. Johnson, H. G. (1966). Factor market distortions and the shape of the transformation curve. Econometrica, 34(3), 686. https://doi.org/10.2307/1909777
  21. Kemfert, C. (1998). Estimated substitution elasticities of a nested CES production function approach for Germany. Energy Economics, 20(3), 249–264. https://doi.org/10.1016/S0140-9883(97)00014-5
  22. Koesler, S., & Schymura, M. (2015). Substitution elasticities in a constant elasticity of substitution framework – Empirical estimates using nonlinear least squares. Economic Systems Research, 27(1), 101–121. https://doi.org/10.1080/09535314.2014.926266
  23. Kwon, J. K., & Paik, H. (1995). Factor price distortions, resource allocation, and growth: A computable general equilibrium analysis. The Review of Economics and Statistics, 77(4), 664. https://doi.org/10.2307/2109814
  24. Liboreiro, P. R. (2022a). Estimating disguised unemployment in major middle-income countries by means of nonlinear input–output analysis, 2000–2014. Economic Systems Research, 1–24. https://doi.org/10.1080/09535314.2022.2135091
  25. Liboreiro, P. R. (2022b). Input-output analysis of some topics in economic structure and structural change. [Doctoral Thesis, Universidad Complutense de Madrid]. https://hdl.handle.net/20.500.14352/3952
  26. Magee, S. P. (1973). Factor market distortions, production, and trade: A survey. Oxford Economic Papers, 25(1), 1–43. https://doi.org/10.1093/oxfordjournals.oep.a041239
  27. Muhammad, A., Seale, J. L., Meade, B., & Regmi, A. (2011). International evidence on food consumption patterns: An update using 2005 international comparison program data. USDA-ERS Technical Bulletin No. 1929. https://doi.org/10.2139/ssrn.2114337
  28. Okagawa, A., & Kanemi, B. A. N. (2008). Estimation of substitution elasticities for CGE models. Discussion Papers in Economics and Business No. 08–16.
  29. Pratap, S., & Quintin, E. (2006). Are labor markets segmented in developing countries? A semiparametric approach. European Economic Review, 50(7), 1817–1841. https://doi.org/10.1016/j.euroecorev.2005.06.004
  30. Restuccia, D., & Rogerson, R. (2017). The causes and costs of misallocation. Journal of Economic Perspectives, 31(3), 151–174. https://doi.org/10.1257/jep.31.3.151
  31. Rosenzweig, M. R. (1988). Labor markets in low-income countries. In H. Chenery & T.N. Srinivasan (Eds.), Handbook of Development Economics (pp. 713–762). Elsevier. https://doi.org/10.1016/S1573-4471(88)01018-6
  32. Timmer, M. P., Dietzenbacher, E., Los, B., Stehrer, R., & de Vries, G. J. (2015). An illustrated user guide to the world input–output database: The case of global automotive production. Review of International Economics, 23(3), 575–605. https://doi.org/10.1111/roie.12178
  33. van der Werf, E. (2008). Production functions for climate policy modeling: An empirical analysis. Energy Economics, 30(6), 2964–2979. https://doi.org/10.1016/j.eneco.2008.05.008
  34. Zhang, S., Luo, J., Huang, D.-H., & Xu, J. (2023). Market distortion, factor misallocation, and efficiency loss in manufacturing enterprises. Journal of Business Research, 154, 113290. https://doi.org/10.1016/j.jbusres.2022.08.054
No Related Submission Found