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The Rural Labor Market
Ábrego, Lisandro. 2000. “Un Modelo de Equilibrio General Aplicado a El Salvador.” In A. Yunez-Naude and R. Hinojosa-Ojeda (eds.), Cambio Estructural y Apertura Comercial en América Central, en la República Dominicana y en Norteamérica: un enfoque de equilibrio general aplicado. México, D.F: Colegio de México. Centro de Estudios Económicos. (S)
Summary: This paper presents the results of a CGE model that simulates the effects of unilateral trade liberalization in El Salvador. The models include three forms of liberalization, including complete tariff removal, and are for three perfectly competitive markets; imports, exports and domestic/internal. Various closures are also assumed, ranging from fixed to flexible external savings and government income. The fixed savings and government income model finds that rural labor gains, coffee production and employment rises and total consumption increases. When external savings and government income are flexible, the increase in total consumption is much larger. Government income falls, but a similar fall in government spending is found to have positive effects on agricultural production, exports and rural wages. The effects of 5% to 20% devaluations also are simulated, finding that larger devaluations produce greater increases in agricultural production, exports, government savings and rural wages.
Region: El Salvador.
Cattaneo, Andrea, Raúl Hinojosa-Ojeda and Sherman Robinson. 2000. “Costa Rica,” In A. Yúnez-Naude and R. Hinojosa-Ojeda (eds.), Cambio Estructural y apertura comercial en América Central, en la República Dominicana y en Norteamérica: un enfoque de equilibrio general aplicado. México, D.F: Colegio de México. Centro de Estudios Económicos. Translated by Carolina Alvarado. (S)
Summary: This paper presents the results of a CGE model that simulates the effects of unilateral trade liberalization in Costa Rica. The results include the effect of various closures and fiscal policy assumptions. The authors find that rural income increases and that agricultural production expands. The greatest benefits are gained when the government does not attempt to compensate for the lost tariff revenue by imposing additional business or sales taxes.
Region: Costa Rica.
Hinojosa-Ojeda, Raul A., Sherman Robinson and Fernando de Paolis. 1999. “Regional Integration among the unequal: a CGE model of NAFTA and the Central American republics.” The North American Journal of Economics and Finance. 10: 235-92.
Summary: Uses a CGE model to look at the effects of a free trade agreement between Central America and the United States The model predicts that such a trade agreement will increase trade both with the agreement partners and with the rest of the world, increasing the growth of GDP for all countries. The estimated increase in GDP growth for each country ranges between 1% and 3%. In the model, labor was only allowed to migrate between countries, but not between categories, so it is unable to track or predict rural to urban migration. When migration is not modeled, the results predict that a free trade agreement with the U.S. would increase rural wages in all five Central American countries.
Region: Costa Rica; El Salvador; Guatemala; Honduras; Nicaragua.
Morley, Samuel and Peter Hazell. 2003. “Reducing Poverty and Hunger in Central America.” Prepared for the World Food Program Conference on Poverty and Hunger. December.
Summary: This paper discusses strategies or considerations to keep in mind when developing poverty reduction programs for Latin America. Emphasizes cash transfer programs, such as PROGRESA in Mexico and PRS in Nicaragua, to keep children in school and argues that they reduce poverty and increase the incomes of the rural poor. Also argues that infrastructure investments can be a form of non-agricultural employment in rural areas, employing unskilled labor in such activities as the construction of roads.
Region: Costa Rica; El Salvador, Guatemala; Honduras; Mexico; Nicaragua.
Morley, Samuel and Valeria Piñiero. 2004. “The Effect of WTO and FTAA on Agriculture and the Rural Sector in Latin America.” DSGD Discussion Paper No.3. Development Strategy and Governance Division, International Food Policy Research Institute. February.
Summary: Combines the results from separate CGE models for Latin America, including Costa Rica, El Salvador and Honduras, which analyze the effect of an FTAA and complete free world trade (WTO). FTAA differs from the WTO scenario in that agricultural subsidies are only removed in the WTO scenario, which causes world prices of staples such as grains and dairy products to increase. Conclusions, generalized for the region, are that trade liberalization reduces gaps between skilled and unskilled workers in both urban and rural areas and that poverty is reduced, especially under the WTO scenario. The most significant reductions in poverty are found when there are large increases in agricultural production, as in Honduras in the simulations. The model predicts agricultural output to decline in Costa Rica and the poor are not benefited, under the WTO simulation. An FTAA is better at reducing poverty in Costa Rica.
Region: Costa Rica; El Salvador; Honduras.
Yúnez-Naude, Antonio and Fernando Barceinas Paredes. 2000. “Guatemala.” In A. Yúnez-Naude and R. Hinojosa-Ojeda (eds.). Cambio Estructural y apertura comercial en América Central, en la República Dominicana y en Norteamérica: un enfoque de equilibrio general aplicado. México, D.F: Colegio de México. Centro de Estudios Económicos. (S)
Summary: This paper presents the results of many simulations of the effects of trade liberalization in Guatemala with a CGE model. The general results are that the tariff reduction (mainly on agricultural goods) has positive effects on rural workers and improving income distribution. A reduction of government spending (due to lower tariff revenue and income) has positive effects on rural wages, production in the agricultural export sector, agro-industry exports and rural consumption. The authors conclude that unilateral trade liberalization favors rural workers through increases in agricultural exports, even though production of basic grains and other rural staples is reduced.
Region: Guatemala.
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