NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Labor Market Distortions and Structural Adjustments in Developing Countries

Sebastian Edwards, Alejandra Cox Edwards

NBER Working Paper No. 3346
Issued in May 1990
NBER Program(s):   ITI   IFM

The purpose of this paper is to provide a typology of different labor market configurations and investigate how two major structural adjustment policies, namely a trade liberalization reform and the relaxation of capital controls, affect the level of aggregate employment and the rate of unemployment. We consider a number of models starting from the traditional Australian approach. We then analyze a multiple sectors intertemporal setting and a model with uncertainty and search. We identify situations under which structural adjustment results in unemployment.

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