A Proximity-Based Approach to Labor Mobility in CGE Models with an Application to Sub-Saharan Africa
The ease with which workers can move between sectors has a strong impact on the effects on labor markets of shocks such as changes in world prices or migration flows. This paper introduces an approach to labor mobility with frictions under which w...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/212941500556224046/A-proximity-based-approach-to-labor-mobility-in-CGE-models-with-an-application-to-Sub-Saharan-Africa http://hdl.handle.net/10986/27958 |
| Summary: | The ease with which workers can move
between sectors has a strong impact on the effects on labor
markets of shocks such as changes in world prices or
migration flows. This paper introduces an approach to labor
mobility with frictions under which worker capabilities
(their efficiencies in different sectors) depend on their
sector affiliation. If workers in sector a move to sector
a', their efficiency shortfall due to a capability
misfit compared to what is needed in a' (and possessed
by workers already in a') is measured by a proximity
parameter, 0 ≤ proxa,a' ≤ 1. If proxa,a' < 1,
the efficient quantity reaching a' is below the
physical quantity. In this setting, profit-maximizing
producers are willing to pay the same wage per efficiency
unit irrespective of worker origin and thus pay less
efficient workers a lower wage per physical unit. This
approach to labor mobility is tested in a static CGE model
that is applied to an illustrative sub-Saharan African
dataset with sector proximities defined using the approach
of the product-space literature. Simulations of positive
export price shocks show that, the higher the proximities,
the stronger the labor reallocation and the welfare gains. |
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