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Ex-Ante Evaluation of Sub-National Labor Market Impacts of Trade Reforms (English)

A macro-micro simulation framework that links a computable general equilibrium model with the survey-based global income distribution dynamics model can be used to assess the economic and distributional effects of macroeconomic shocks and policies. The methodology is used to assess the economic and subnational labor market impacts of a series of stylized trade policy options for the Sri Lankan economy over a 10-year time period. The analysis focuses on the impact of unilateral para-tariff liberalization, free-trade agreements with China or India, and a full-reform scenario. The simulation results show that more ambitious trade reform can result in larger gains in gross domestic product, poverty reduction, and exports, particularly in sectors employing a higher proportion of women. In the absence of additional policies, growth is not equally distributed. In all the scenarios in which the Sri Lankan economy grows, the distribution of gains is regressive. Increasing labor demand for skilled workers translates into a larger skilled wage premium -- by as much as 1.1 percent with respect to the baseline. Implementation of full trade reform accelerates the concentration of economic activity in the western regions of Colombo, Gampaha, and Kalutara. Net employment gains in the western regions would increase from 111,000 to 136,000 in the full reform scenario by 2028 and with respect to baseline conditions.


  • Author

    Maliszewska,Maryla, Osorio-Rodarte,Israel, Nichanametla Ramasubbaiah,Rakesh Gupta

  • Document Date


  • Document Type

    Policy Research Working Paper

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  • Volume No


  • Total Volume(s)


  • Country


    Sri Lanka,



  • Region

    The World Region, South Asia, East Asia and Pacific,

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  • Doc Name

    Ex-Ante Evaluation of Sub-National Labor Market Impacts of Trade Reforms

  • Keywords

    Agriculture; labor market impact; trade and investment; tariff line; distributional impact of policy reforms; computable general equilibrium model; unilateral liberalization; custom duty; import duty; labor force participation rate; per capita income growth; impact of policy change; structure of labor market; vegetable and fruit; adjusted estimate; change in labor supply; global computable general equilibrium; total worker; access to foreign market; weighted average; baseline scenario; reform scenario; real exchange rate; trade and transportation; monthly wage; working age population; trade policy simulation; impact of reforms; years of schooling; imports of rice; effect of trade; tax on imports; International Trade; household survey; customs datum; relative price; change in supply; improved market access; reduction of barriers; reduce trade; redistribution of resource; average monthly wage; availability of capital; impact of trade; volume of trade; level of employment; labor market regulation; simulation model; productivity growth; social service sector; gender wage gap; number of workers; free trade agreement; changes in trade; expenditure on food; consumption per capita; average wage; employment in agriculture; real growth rate; agricultural and food; demand for labor; factor price equalization; imported inputs; barriers to mobility; cost of living; unskilled worker; labor market segmentation; labor market specification; degree of autonomy; neoclassical economic theory; proportion of woman; trade policy options; skilled wage premium; global value chain; Trade Policies; open economy; analysis of poverty; simulation result; open trade policies; several sectors; agricultural product; macro model; agriculture sector; imperfect substitution; agricultural sector; sectoral reallocation; foreign saving; closure rule; trade balance; female workers; Political Economy; Population Growth; capital accumulation; food product; absolute reduction; comparative advantage; data availability; other sectors; fiscal balance; Public Utilities; relative wage; household income; production process; factor market; domestic output; individual characteristic; business service; manufacturing sector; protection rate; simulation exercise; rural woman; capital stock; demographic change; skilled labor; manufacturing jobs; tariff reduction; intermediate input; confidence interval; global income; gender composition; economic shock; import tax; educational achievement; educational progress; lower rate; factor return; trade costs; unobserved characteristic; individual level; protection level; internal consistency; empirical study; exogenous growth; conservative assumption; productivity factor; mineral water; real gdp; primary commodity; long-term projection; baseline conditions; net migration; weighting procedure; retirement age; demographic profile; simulation procedure; demographic structure; short period; protected products; rural region; working-age population; education projections; first stage; employment estimates; government expenditure; high duties; high tariff; special order; apparel sector; import sector; high share; business sector; development policy; wage distribution; staple food; descriptive statistic; commerce sector; second job; recent years; open access; low rate; labor use; public resource; detail level; information gap; Global Gender; labor income; employment status; ad valorem; rural man; political instability; household size; price deflator; price index; Research Support; budget share; household consumption; potential trade; absolute decline; price taker; international market; external balance; export basket; policy scenario; macroeconomic result; free access; aggregate result; saving function; skill profile; trade creation; sampling frame; dependency rate; stratified sampling; estate sector; average propensity; productivity assumption; tariff reform; Population Projection; corner solution; domestic production; skill formation; trade shoc



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Maliszewska,Maryla Osorio-Rodarte,Israel Nichanametla Ramasubbaiah,Rakesh Gupta

Ex-Ante Evaluation of Sub-National Labor Market Impacts of Trade Reforms (English). Policy Research working paper,no. WPS 9478 Washington, D.C. : World Bank Group.