Exports, production and uncertainty

Includes bibliographical references (p

Are labor markets in developing countries dualistic?

There is a long tradition of viewing as disadvantaged the roughly 40 percent of workers in developing countries who are unprotected by labor legislation and work in small"informal"firms. The author offers an alternative to traditional views of the relationship between formal and informal labor markets: For many workers, inefficiencies in present labor codes and relatively low levels of human capital (labor productivity) may make employment in the informal sector more desirable. He offers the first study of worker transitions among sectors, using detailed panel data from Mexico, and finds little evidence to support the traditional dualistic view. He shows that traditional earning differentials cannot prove or disprove segmentation in developing countries, and patterns of worker mobility do not suggest a rigid labor market -- or one segmented into formal and informal divisions. It is possible that the market is dualistic in the sense used in the industrial world, but the division between good jobs and bad jobs seems to cut across issues of formality.Work&Working Conditions,Labor Policies,Environmental Economics&Policies,Banks&Banking Reform,Labor Standards,Banks&Banking Reform,Environmental Economics&Policies,Labor Standards,Health Monitoring&Evaluation,Work&Working Conditions

The structure of labor markets in developing countries : time series evidence on competing views

Competing conceptions of the large, unprotected,"informal"workforce in developing countries differ greatly in their implications for the labor reform considered to be essential complements to trade liberalization and"fair"competition in international trade. Traditionally, the informal sector is viewed as the disadvantaged segment of a dual labor market segmented by legislated or union-induced rigidities and high labor costs in the protected (or"informal") sector. In this view, the size of the informal sector is a testament to the inefficiencies in labor allocation and the magnitude of required reform. In cyclical downturns, the informal sector is thought to absorb displaced workers from the formal sector (with informal earnings falling relative to those in the formal sector) and then to contract again during recovery as the queue for"good jobs"shortens again. A recent, related view postulates a long-term trend in which large enterprises, confronted by heightened global competition, increasingly subcontract to unprotected workers as a way to reduce costs and gain flexibility. This is particularly relevant in the debate about establishing common labor standards in regional trade agreements. The author reexamines the traditional view of the dual labor market by studying the dynamics between the formal and informal sectors across a business cycle and a period of trade liberalization in Mexico (1987-93). He shows conventional comparisions of earnings, even across time, to be unreliable tests for segmentation. As an alternative, he shows that transitions on informal employment, the size of the informal sector, and levels of mobility to be procyclical, increasing with upturns, and decreasing with recessions. He tests for, and finds, however, some evidence of queuing to enter formal employment. Overall, he contends, the informal sector behaves as an unregulated entrepreneurial sector rather than the disadvantaged wing of a dual labor market. There is evidence of increased subcontracting over time, with trade liberalization, but it is not clear that workers are worse off as a result.Labor Policies,Banks&Banking Reform,Environmental Economics&Policies,Work&Working Conditions,Public Health Promotion,Labor Standards,Banks&Banking Reform,Health Monitoring&Evaluation,Environmental Economics&Policies,Work&Working Conditions

In search of the missing resource curse

The debate over the curse of natural resources has haunted developing countries for decades if not centuries. A review of existing empirical evidencesuggests that the curse remains elusive. The fragile negative effect of natural resources on economic growth might be due to international heterogeneity in the effects of natural resources on economic growth, to the use of weak indicators of natural resources that might be unrelated to relative natural-resource endowments, or to the inability of econometric analysis based on international data to capture historical processes. This paper defends an empirical proxy for relative abundance of natural resources, which is based on standard growth theory. In turn, various econometric estimations are hopelessly deployed in the search for the missing resource curse. Some evidence suggests that natural resources might have large positive effects whose true magnitude remains unknown due to unresolved econometric issues.Economic Theory&Research,Inequality,Currencies and Exchange Rates,Economic Growth,Achieving Shared Growth

Research and development (R&D) and development

Lederman and Maloney trace the evolution of research and development (R&D) expenditures along the development process using a new global panel data set. They show that R&D effort measured as a share of GDP rises with development at an increasing rate. The authors examine how four groups of countries from Latin America, Asia, advanced manufacturing exporters, and advanced natural resource-abundant countries fare relative to the predicted development trajectory. Latin America generally underperforms as do some countries in Asia and Europe, but their striking finding is that some-Finland, Israel, the Republic of Korea, and Taiwan (China)-have radically deviated from the predicted trajectory and displayed impressive R&D takeoffs. The authors ask whether these countries overinvest in R&D but find that the high estimates of the social rates of return probably justify this effort. Moreover, the returns to R&D decline with per capita GDP. The authors attempt to explain why rich countries invest more in R&D than poor countries. They conclude that financial depth, protection of intellectual property rights, government capacity to mobilize resources, and the quality of research institutions are the main reasons why R&D efforts rise with the level of development.Scientific Research&Science Parks,Economic Theory&Research,Environmental Economics&Policies,Decentralization,Agricultural Knowledge&Information Systems,Economic Theory&Research,Science Education,Scientific Research&Science Parks,Environmental Economics&Policies,Education and Digital Divide

Trade structure and growth

Lederman and Maloney examine the empirical relationships between trade structure and economic growth, particularly the influence of natural resource abundance, export concentration, and intra-industry trade. They test the robustness of these relationships across proxies, control variables, and estimation techniques. The authors find trade variables to be important determinants of growth, especially natural resource abundance and export concentration. In contrast with much of the recent literature, natural resource abundance appears to have a positive effect on growth, whereas export concentration hampers growth, even after controlling for physical and human capital accumulation, among other factors.Economic Conditions and Volatility,Environmental Economics&Policies,Health Monitoring&Evaluation,Economic Theory&Research,Public Health Promotion,Economic Theory&Research,Achieving Shared Growth,Environmental Economics&Policies,Economic Growth,Inequality

Trade reform, uncertainty, and export promotion : Mexico 1982-88. BEBR 92-0135

Bibliography ; p. [22-24]

Quitting and labor turnover : microeconomic evidence and macroeconomic consequences

Combining microeconomic evidence with macroeconomic theory, the authors present an integrated approach to wage and employment determination in an economy where firms pay above market"efficiency wages"to prevent trained workers from quitting. The model offers predictions about the behavior of formal employment, labor turnover, and segmentation in response to formal sector productivity shocks (including economic growth and tax reductions), changes in the desirability of self-employment (formal sector tax rates), and the cost of training a new worker. They use panel data from Mexican labor surveys to estimate the quit function derived fromthe model and the results support their view that transitions from formal salaried work to informal self-employment are quits rather than fires. (Quitting is positively related to the mean self-employment income and the probability of being rehired and negatively related to the mean formal salaried wage.) They then use the parameters estimated from the quit function to calibrate the model economy and simulate the impacts of economic shocks and policy innovations and find the impact on employment, turnover, and segmentation to be substantial.Environmental Economics&Policies,Public Health Promotion,Labor Policies,Economic Theory&Research,Labor Management and Relations,Health Monitoring&Evaluation,Banks&Banking Reform,Environmental Economics&Policies,Economic Theory&Research,Labor Management and Relations

Labor demand andtrade reform in Latin America

There are concerns that trade reform and globalization will increase the uncertainty that the average worker, especially the relatively unskilled worker, faces. The increased competitiveness of product markets and greater access to foreign inputs, the argument goes, will lead to more elastic demand for workers. This may have adverse consequences for both labor market volatility and wage dispersion. The authors argue that while the case that trade liberalization should increase own-wage elasticities may be broadly compelling for competitive import-competing industries, it is less so for imperfectly competitive, nontradable, or export industries. They test the hypothesis using establishment-level panel data from three countries with periods of liberalization. The data provide only mixed support for the idea that trade liberalization has an impact on own-wage elasticities. No consistent patterns emerge. If globalization is making the lives of workers more insecure, it is probably working through some other mechanism.Environmental Economics&Policies,Economic Theory&Research,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Inequality,Markets and Market Access

Migration, trade, and foreign investment in Mexico

Part of the rationale for the North American Free Trade Agreement (NAFTA) was that it would increase trade and foreign direct investment (FDI) flows, creating jobs and reducing migration to the United States. Since poor data on illegal flows to the United States make direct measurement difficult, Aroca and Maloney instead evaluate the mechanism behind these predictions using data on migration within Mexico where the census data permit careful analysis. They offer the first specifications for migration within Mexico, incorporating measures of cost of living, amenities, and networks. Contrary to much of the literature, labor market variables enter very significantly and as predicted once the authors control for possible credit constraint effects. Greater exposure to FDI and trade deters out-migration with the effects working partly through the labor market. Finally, the authors generate some tentative inferences about the impact on increased FDI on Mexico-U.S. migration. On average, a doubling of FDI inflows leads to a 1.5-2 percent fall in migration.Economic Theory&Research,Health Monitoring&Evaluation,Environmental Economics&Policies,Banks&Banking Reform,Municipal Financial Management