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Trade bust, labor and wage policy in Bolivia: a CGE approach

Author

Listed:
  • Rolando Morales
  • Erick Gomez
  • Monica Cueto
  • Estefani Parisaca
  • Jazmin Illanes

Abstract

In this paper, we evaluate the possible impact of the labor and wage policy in Bolivia’s economy in the event of a reduction in the price of exports. For this analysis, we use a CGE model with a 2012 SAM. The Bolivian labor policy is characterized by compulsory increments in the private formal wage and an expanding labor force in the public services. A labor supply function allows migration between formality and informality and a reservation wage curve differentiates the nature of unemployment in the formal and the informal sector. The labor and wage policy does three things: 1) it promotes household consumption but reduces the GDP, decreases investment and growth, 2) it increases the rate of formality only at the expense of higher unemployment, and 3) it swells the primary sector to the detriment of the secondary sector. In the face of a decrease in commodity prices, Bolivia needs to make a correction of course in the labor and wage policy.

Suggested Citation

  • Rolando Morales & Erick Gomez & Monica Cueto & Estefani Parisaca & Jazmin Illanes, 2017. "Trade bust, labor and wage policy in Bolivia: a CGE approach," Working Papers MPIA 2017-16, PEP-MPIA.
    • Handle: RePEc:lvl:mpiacr:2017-16
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    Cited by:

    1. Timilsina,Govinda R. & Dissou,Yazid & Toman, Mike & Heine,Dirk, 2021. "Carbon Tax in an Economy with Informality : A Computable General Equilibrium Analysis for Cote d’Ivoire," Policy Research Working Paper Series 9710, The World Bank.
    2. Escalante, Luis Enrique & Maisonnave, Helene, 2022. "Impacts of climate disasters on women and food security in Bolivia," Economic Modelling, Elsevier, vol. 116(C).
    3. Luis Enrique Escalante Ochoa & Hélène Maisonnave, 2021. "The impact of the COVID-19 pandemic on women's welfare and domestic burdens in Bolivia," Working Papers hal-03118060, HAL.

    More about this item

    Keywords

    Formal and Informal Sectors; Simulation Modeling;

    JEL classification:

    • O17 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements
    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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