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Trade Liberalization and Labor-Demand Elasticities: Empirical Evidence from Tunisia

Author

Listed:
  • Haouas, Ilham

    (Abu Dhabi University)

  • Yagoubi, Mahmoud

    (University of Paris 1 Panthéon-Sorbonne)

Abstract

This paper investigates the effects of trade liberalization on labor demand elasticities. Employment demand equation is estimated by using data (1971-1996) for manufacturing industries in Tunisia. Results from empirical testing using the model find a weak support for the idea assuming that trade liberalization will lead to an increase in labor demand elasticities: in the vast majority of the industries we consider, we cannot reject the hypothesis of no relationship between trade openness and labor-demand elasticities. This weakness of labor demand elasticity in practice is perhaps explained by the tight labor market regulations in place during the years 1987-96. However, our results are robust to the type of labor considered (contract labor and permanent labor). This supports the conclusion that in liberalization periods labor markets have become more flexible, and that employers prefer recruiting contract workers.

Suggested Citation

  • Haouas, Ilham & Yagoubi, Mahmoud, 2004. "Trade Liberalization and Labor-Demand Elasticities: Empirical Evidence from Tunisia," IZA Discussion Papers 1084, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp1084
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    References listed on IDEAS

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    8. Ilham Haouas & Mahmoud Yagoubi & Almas Heshmati, 2005. "The impacts of trade liberalization on employment and wages in Tunisian industries," Journal of International Development, John Wiley & Sons, Ltd., vol. 17(4), pages 527-551.
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    Cited by:

    1. Sun, Churen & Liu, Xuemei & Xu, Jinqiang, 2023. "Does China’s market opening eased its trade partners’ domestic conflicts? – Evidence from China’s WTO accession," Journal of Asian Economics, Elsevier, vol. 89(C).
    2. Lichter, Andreas & Peichl, Andreas & Siegloch, Sebastian, 2015. "The own-wage elasticity of labor demand: A meta-regression analysis," European Economic Review, Elsevier, vol. 80(C), pages 94-119.
    3. Bushra Yasmin & Aliya H. Khan, 2011. "Trade Openness: New Evidence for Labor-Demand Elasticity in Pakistan's Manufacturing Sector," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 16(2), pages 55-85, Jul-Dec.
    4. Rzigui, Lotfi, 2005. "External shocks and economic fluctuations: evidence from Tunisia," MPRA Paper 630, University Library of Munich, Germany, revised Dec 2005.

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    More about this item

    Keywords

    factor demand elasticities; imperfect competition; trade reforms; Tunisian manufacturing industries;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General

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