| Using an applied general equilibrium model we explore the potential effect of comprehensive trade liberalization in a selection of Latin American developing economies. Over the last decade many of these economies have suffered from high levels of unemployment, and the consequences of reform on unemployment and of unemployment on the effects of reform are critical. We take the approach of utilizing alternative labor market closures, bounding the static effect of trade reform between the neoclassical, which abstracts from unemployment issues, and a surplus labor/unemployment closure. We also consider a less common specification based on the neoclassical Harris-Todaro characterization of the dual economy. Our results indicate that the presence of unemployment may significantly expand the potential net welfare benefits of trade reform in the Americas. |
Abstract |
