Evidence on the Impact of Tariff Reductions on Employment in Developing Countries: A Systematic Review

23 Pages Posted: 11 Jun 2014

See all articles by X. Cirera

X. Cirera

Institute of Development Studies; World Bank

Dirk Willenbockel

University of Sussex - Institute of Development Studies

Rajith W.D. Lakshman

University of Colombo - Department of Economics

Date Written: July 2014

Abstract

This paper analyses the evidence on the impact of tariff reductions on employment in developing countries. We carry out a systematic review of the existing empirical literature, and include both, ex post econometric evidence and ex ante Computable General Equilibrium (CGE) simulation studies. The synthesis of results suggests that the effects of tariff reductions on employment are country and trade policy specific. When looking across higher quality econometric studies that control for the endogeneity of tariffs, only a couple of studies have statistically significant results, and these suggest that employment is likely to decrease slightly in the short run following trade liberalization. This is consistent with the notion that there are winners and losers from trade policy reform. These results are in contrast with the CGE findings, which by design incorporate projections of the medium‐run economy‐wide knock‐on effects suggested by economic theory. The synthesis of CGE studies suggests non‐negative effects of trade liberalization on aggregate employment and moderate inter‐sectoral labour reallocation effects.

Keywords: CGE, Employment, Systematic review, Tariff reductions, Trade liberalization

Suggested Citation

Cirera, Xavier and Willenbockel, Dirk and Lakshman, Rajith W.D., Evidence on the Impact of Tariff Reductions on Employment in Developing Countries: A Systematic Review (July 2014). Journal of Economic Surveys, Vol. 28, Issue 3, pp. 449-471, 2014. Available at SSRN: https://ssrn.com/abstract=2448758 or http://dx.doi.org/10.1111/joes.12029

Xavier Cirera (Contact Author)

Institute of Development Studies ( email )

University of Sussex
Falmer, Brighton, East Sussex BN1 9RE
United Kingdom

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Dirk Willenbockel

University of Sussex - Institute of Development Studies ( email )

Brighton
Falmer, Brighton, East Sussex BN1 9RE
United Kingdom

HOME PAGE: http://www.ids.ac.uk

Rajith W.D. Lakshman

University of Colombo - Department of Economics ( email )

Department of Business Economics
Colombo 3, Western
Sri Lanka

HOME PAGE: http://www.cmb.ac.lk/academic/arts/econ/academics/dr_rajith.php

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