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Trade Liberalization or Productivity Increase?

Trade Liberalization or Productivity Increase?. Amal ELBESHBISHI Mitsuhiko KATAOKA. Motivation. Base Scenario: EU RSA Benefit from FTA But Botswana Not. Botswana: Decrease in welfare. Endowment effect: 0.9 % decline in the use of unskilled labor.

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Trade Liberalization or Productivity Increase?

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  1. Trade Liberalization or Productivity Increase? Amal ELBESHBISHI Mitsuhiko KATAOKA

  2. Motivation • Base Scenario: EU RSA Benefit from FTA But Botswana Not. • Botswana: Decrease in welfare. Endowment effect: 0.9 % decline in the use of unskilled labor. • The original study didn’t take the effect of technical change into consideration.

  3. Assumptions & Scenarios Assumptions - Closure Change Exogenous: Supply of Labor Endogenous: Real Wage Rate 2 Scenarios: 2% Productivity Increase Region: Botswana, Sector: Agriculture 1st: Unskilled Labor (afeall) 2nd: Output (aoall)

  4. Simulation Results - 1 S1 shows productivity increase in unskilled labor (afeall) whereas S2 shows productivity increase in Output (aoall).

  5. Simulation Results2 – Tech1 Unskilled Labor - The unskilled labor increased! Expansion Effect is the Major Source! Share of Agr in total value added in endowment is big enououh!

  6. Implication Although trade liberalization is important but we can’t glorify it’s effect. Not only Demand Side but also Supply Side should be focused.

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