Regionalization and Labour Market Rigidities in Developing Countries: A CGE Analysis of UEMOA

Bernard Decaluwe (bdec@ecn.ulaval.ca), Yazid Dissou and Véronique Robichaud

Cahiers de recherche from Université Laval - Département d'économique

Abstract:

In this study, we analyse the impact of the creation of a customs union among UEMOA (Western African Economic and Monetary Union)countries, with a special emphasis on the labour market structure. The implementation of the customs union reform will translate in most of these countries, into a greater openness, even with third party countries. This greater openness raises concerns in these countries as regards its potential impact on welfare, production and employment. In this study, in contrast to many other papers, we relax the assumption of a perfect functioning of the labour market. We consider the presence of a dualism in the labour market and the existence of a minimum wage for the formal workers. We use a multi-country and multi-sectoral computable general equilibrium model (CGE) to assess the impact of the reform. We find that the presence of a minimum nominal wage for the formal workers may significantly reduce the gains stemming from the customs union reform. Our simulation results indicate that the costs induced by this rigidity may exceed 45%, in some cases, in terms of the reduction in the welfare gains obtained without rigidity.

Keywords: Economic integration; Customs union; Labor market; Dualism; Wage rigidity (search for similar items in EconPapers)
JEL-codes: F13 F15 O15 (search for similar items in EconPapers)
Date: 1999
New Economics Papers: this item is included in nep-dev
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:lvl:laeccr:9917

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