Trade and agricultural employment linkages in general equilibrium modelling

Trade negotiators are frequently concerned about the possible negative effects of trade liberalisation on employment in specific sectors. The agricultural sector in developing countries has characteristics that make it different from industrial or service sectors. These characteristics are an informal labour force, low productivity, absence of regulations and a tie to land. These features affect adjustment costs. A global computable general equilibrium model, GTAP, is used to analyse employment and wage effects of trade liberalization in three developing countries — Indonesia, Bangladesh and Guatemala. The ability to fully utilize all resources, including labour, is important. The results highlight the advantage of a functioning and flexible labour market that can readily adjust to trade shocks