The effects of increasing openness and integration to the MERCOSUR on the Uruguayan labour market. A CGE modeling analysis

María Terra, Marisa Bucheli, Silvia Laens () and Carmen Estrades
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Silvia Laens: CINVE

No 1205, Documentos de Trabajo (working papers) from Department of Economics - dECON

Abstract: Uruguay is a small economy. Its integration to MERCOSUR has increased the exposure to regional macroeconomic inestability. The aim of this paper is to assess the impact of regional integration on labour market and poverty. We estimated wage differentials between labour categories, finding a 60% wage gap between formal and informal workers. A CGE model with an efficiency wage specification for unskilled labour was built. Results show that regional shocks deeply affect Uruguayan economy. The consideration of efficiency wage model is particularly important when shocks lead to a reallocation of resources towards sectors intensive in unskilled labour. A subsidy on formal, unskilled labour could contribute to decrease informality and therefore increase GDP, but this type of policy need to be carefully implemented, because it may have negative effects on investment. Finally, the effects on poverty and income distribution obtained through microsimulations are consistent with the results of the CGE experiments.

Keywords: Uruguay; labour market; general equilibrium model; regional integration; efficiency wage; microsimulation; poverty (search for similar items in EconPapers)
JEL-codes: D58 F15 F16 I32 J41 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2005-11
New Economics Papers: this item is included in nep-cmp, nep-int and nep-lab
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Citations: View citations in EconPapers (1)

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https://hdl.handle.net/20.500.12008/2029 (application/pdf)

Related works:
Working Paper: The Effects of Increasing Openness and Integration to the MERCOSUR on the Uruguayan Labour Market: a CGE Modelling Analysis (2006)
Working Paper: The Effects of Increasing Openness and Integration to the MERCOSUR on the Uruguayan Labour Market: A CGE Modeling Analysis (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ude:wpaper:1205

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