The Impacts of Trade on the Brazilian Labor Market: A CGE Model Approach

• Published in: World development Vol. 31; no. 9; pp. 1581 - 1595
• Main Authors: Carneiro, Francisco Galrão, Arbache, Jorge Saba
• Format: Journal Article
• Language: English
• Published: Oxford Elsevier Ltd 01-09-2003; Elsevier; Pergamon Press Inc
• Series: World Development
• Subjects: Brazil; Developing countries; Development studies; Economic growth; Economic models; Economic theory; Employment; General economic equilibrium; Inequality; Labor market; Labour market; Macroeconomics; Poverty alleviation; Studies; Trade; Trade liberalization; wages; Brazil; wages; inequality; trade; employment
• ISSN: 0305-750X; 1873-5991
• DOI: 10.1016/S0305-750X(03)00106-2

The paper assesses the impacts of trade liberalization on macroeconomic variables and labor market indicators in Brazil. The discussion comes out of an earlier debate on the role of trade liberalization in shaping labor market outcomes in the well-known Heckscher–Ohlin and Stolper–Samuelson (HOS) theorems. To address these issues, we use a computable general equilibrium (CGE) modeling approach to model the patterns of export growth by sector and their effects on macroeconomic and labor market indicators. Overall our results show that trade liberalization contributes to improve economic welfare by means of greater output, lower domestic prices, and higher labor demand. The benefits of this economic improvement tend however, to be appropriated by the most skilled workers in the most trade-oriented sectors, contradicting the predictions of the HOS theorems.