MODELING LABOR-MARKET ADJUSTMENT TO TRADE LIBERALIZATION IN AN INDUSTRIALIZING ECONOMY

This paper investigates labour market responses to trade liberalisatio n in an industrialising country. Short and long run responses of emplo yment and wages are examined using a specific factor trade model, whic h underpins the empirical work. Employment and wage equations are esti mated using dynamic panel techniques for importable and exportable sec tors in Mauritius and for a period covering both the pre-and post-libe ralisation regimes. The empirical testing finds some support for the t heoretical predictions of differential responses between sectors. Incr eases in female participation, however, appear to have dampened the ad justment burdens of liberalisation on importables.