Interactions Between Trade Policy and Labor Market Policy and Their Effects on Development

[Excerpt] Studies of various countries show that those which have emphasized an export-led growth strategy have, in general, outperformed those which have followed an import substitution orientation. Accordingly, AID is currently focusing on export promotion as a means to stimulate economic growth and development. An effective export-led strategy requires an integrated overall policy setting. In particular, trade and foreign sector policies must be related to labor market policies. Because labor market policy might reinforce or nullify trade policy, and because labor market issues merit attention per se, AID has an interest in research on how trade policies and labor market policies interact to affect economic development. The research reported here -- primarily theoretical but also including one empirical study -- helps fill that need