Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay

The authors use a panel of manufacturing firms to analyze the adjustment process in capital blue collar and white collar employment in Uruguay during a period of trade liberalization when average tariff protection fell from 43 to 14 percent. They calculate the desired factor levels arising from a co...

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Main Authors:	Casacuberta, Carlos, Gandelman, Néstor
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	ABSOLUTE VALUE ADJUSTMENT COST ADJUSTMENT COSTS ADJUSTMENT PROCESS AGGREGATE EMPLOYMENT AVERAGE TARIFF BUSINESS CYCLE CAPITAL INPUTS CAPITAL STOCK CLERKS CONSTANT RETURNS CONSTANT RETURNS TO SCALE COST FUNCTIONS CREATING JOBS DEMAND SHOCKS DEMOCRATIC INSTITUTIONS DEREGULATION DOMESTIC MARKET ECONOMIC ACTIVITY ECONOMIC PERFORMANCE ELASTICITY ELASTICITY OF DEMAND EMPLOYMENT DYNAMICS EMPLOYMENT GROWTH EMPLOYMENT LEVEL ENDOGENOUS VARIABLES EXOGENOUS SHOCK EXOGENOUS VARIABLES EXPORT BIAS EXPORT MARKET EXPORT ORIENTATION EXPORT SHARES EXPORTS EXTERNAL TARIFF FACTOR GROWTH FACTOR LEVELS FACTOR MARKETS FACTORS OF PRODUCTION FINANCIAL CRISIS FISCAL POLICIES FIXED COSTS FUNCTIONAL FORM GDP GROSS OUTPUT GROWTH RATES HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPORT TARIFF IMPORT TARIFFS INCREASING RETURNS INDUSTRIAL SECTOR JOB CREATION JOB DESTRUCTION JOB DESTRUCTION RATES LABOR ADJUSTMENT LABOR SHORTAGES LABOR UNIONS LEVELS OF CAPITAL LOCAL FIRMS MARGINAL COST OPENNESS OPTIMIZATION POLITICAL ECONOMY PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROFIT MAXIMIZATION PROTECTIONIST POLICIES READERS RELATIVE PRICES SEVERANCE PAYMENTS STATISTICAL ANALYSIS TARIFF BARRIERS TARIFF LEVELS TARIFF PROTECTION TARIFF REDUCTIONS TOTAL COSTS TOTAL EMPLOYMENT TOTAL FACTOR PRODUCTIVITY TRADE BLOCK TRADE LIBERALIZATION TRADE LIBERALIZATION PROCESS TRADE OPENNESS TRADE POLICY TRADE PROTECTION TRADE REFORM TRAINING COST TRAINING COSTS UNEMPLOYMENT UNILATERAL TARIFF REDUCTION UPWARD SHIFT WAGES WHITE COLLAR WORKERS WORKER WORKERS
Online Access:	http://documents.worldbank.org/curated/en/2006/04/6731296/protection-openness-factor-adjustment-evidence-manufacturing-sector-uruguay http://hdl.handle.net/10986/8720

id	okr-10986-8720
recordtype	oai_dc
spelling	okr-10986-87202021-04-23T14:02:40Z Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay Casacuberta, Carlos Gandelman, Néstor ABSOLUTE VALUE ADJUSTMENT COST ADJUSTMENT COSTS ADJUSTMENT PROCESS AGGREGATE EMPLOYMENT AVERAGE TARIFF BUSINESS CYCLE CAPITAL INPUTS CAPITAL STOCK CLERKS CONSTANT RETURNS CONSTANT RETURNS TO SCALE COST FUNCTIONS CREATING JOBS DEMAND SHOCKS DEMOCRATIC INSTITUTIONS DEREGULATION DOMESTIC MARKET ECONOMIC ACTIVITY ECONOMIC PERFORMANCE ELASTICITY ELASTICITY OF DEMAND EMPLOYMENT DYNAMICS EMPLOYMENT GROWTH EMPLOYMENT LEVEL ENDOGENOUS VARIABLES EXOGENOUS SHOCK EXOGENOUS VARIABLES EXPORT BIAS EXPORT MARKET EXPORT ORIENTATION EXPORT SHARES EXPORTS EXTERNAL TARIFF FACTOR GROWTH FACTOR LEVELS FACTOR MARKETS FACTORS OF PRODUCTION FINANCIAL CRISIS FISCAL POLICIES FIXED COSTS FUNCTIONAL FORM GDP GROSS OUTPUT GROWTH RATES HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPORT TARIFF IMPORT TARIFFS INCREASING RETURNS INDUSTRIAL SECTOR JOB CREATION JOB DESTRUCTION JOB DESTRUCTION RATES LABOR ADJUSTMENT LABOR SHORTAGES LABOR UNIONS LEVELS OF CAPITAL LOCAL FIRMS MARGINAL COST OPENNESS OPTIMIZATION POLITICAL ECONOMY PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROFIT MAXIMIZATION PROTECTIONIST POLICIES READERS RELATIVE PRICES SEVERANCE PAYMENTS STATISTICAL ANALYSIS TARIFF BARRIERS TARIFF LEVELS TARIFF PROTECTION TARIFF REDUCTIONS TOTAL COSTS TOTAL EMPLOYMENT TOTAL FACTOR PRODUCTIVITY TRADE BLOCK TRADE LIBERALIZATION TRADE LIBERALIZATION PROCESS TRADE OPENNESS TRADE POLICY TRADE PROTECTION TRADE REFORM TRAINING COST TRAINING COSTS UNEMPLOYMENT UNILATERAL TARIFF REDUCTION UPWARD SHIFT WAGES WHITE COLLAR WORKERS WORKER WORKERS The authors use a panel of manufacturing firms to analyze the adjustment process in capital blue collar and white collar employment in Uruguay during a period of trade liberalization when average tariff protection fell from 43 to 14 percent. They calculate the desired factor levels arising from a counterfactual profit maximization in the absence of adjustment costs, generating a measure of factor shortages or surpluses. The average estimated output gap for 1982-95 is 2 percent. The authors' policy analysis shows that trade openness affected the adjustment functions of all three factors of production. Highly protected sectors adjust less when creating jobs (reducing labor shortages) than sectors with low protection. This may be due to fears of policy reversal in highly protected sectors. Also, highly protected sectors adjust more easily (than low protection sectors) when destroying jobs (reducing labor surpluses), especially in the case of blue collar labor. This suggests that trade protection may in fact destroy rather than create jobs within industries, as firms in highly protected sectors are more reluctant to hire and more ready to fire than firms in sectors with low protection. The results for capital are qualitatively similar but quantitatively smaller, suggesting that trade protection plays less of a role in explaining adjustment costs for capital. Interestingly, export-oriented sectors have lower adjustment costs for blue collar labor but not for white collar employment or capital, suggesting that export-led growth may be particularly successful in reducing blue collar unemployment. 2012-06-21T20:41:58Z 2012-06-21T20:41:58Z 2006-04 http://documents.worldbank.org/curated/en/2006/04/6731296/protection-openness-factor-adjustment-evidence-manufacturing-sector-uruguay http://hdl.handle.net/10986/8720 English Policy Research Working Paper; No. 3891 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research Latin America & Caribbean Uruguay
repository_type	Digital Repository
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English
topic	ABSOLUTE VALUE ADJUSTMENT COST ADJUSTMENT COSTS ADJUSTMENT PROCESS AGGREGATE EMPLOYMENT AVERAGE TARIFF BUSINESS CYCLE CAPITAL INPUTS CAPITAL STOCK CLERKS CONSTANT RETURNS CONSTANT RETURNS TO SCALE COST FUNCTIONS CREATING JOBS DEMAND SHOCKS DEMOCRATIC INSTITUTIONS DEREGULATION DOMESTIC MARKET ECONOMIC ACTIVITY ECONOMIC PERFORMANCE ELASTICITY ELASTICITY OF DEMAND EMPLOYMENT DYNAMICS EMPLOYMENT GROWTH EMPLOYMENT LEVEL ENDOGENOUS VARIABLES EXOGENOUS SHOCK EXOGENOUS VARIABLES EXPORT BIAS EXPORT MARKET EXPORT ORIENTATION EXPORT SHARES EXPORTS EXTERNAL TARIFF FACTOR GROWTH FACTOR LEVELS FACTOR MARKETS FACTORS OF PRODUCTION FINANCIAL CRISIS FISCAL POLICIES FIXED COSTS FUNCTIONAL FORM GDP GROSS OUTPUT GROWTH RATES HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPORT TARIFF IMPORT TARIFFS INCREASING RETURNS INDUSTRIAL SECTOR JOB CREATION JOB DESTRUCTION JOB DESTRUCTION RATES LABOR ADJUSTMENT LABOR SHORTAGES LABOR UNIONS LEVELS OF CAPITAL LOCAL FIRMS MARGINAL COST OPENNESS OPTIMIZATION POLITICAL ECONOMY PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROFIT MAXIMIZATION PROTECTIONIST POLICIES READERS RELATIVE PRICES SEVERANCE PAYMENTS STATISTICAL ANALYSIS TARIFF BARRIERS TARIFF LEVELS TARIFF PROTECTION TARIFF REDUCTIONS TOTAL COSTS TOTAL EMPLOYMENT TOTAL FACTOR PRODUCTIVITY TRADE BLOCK TRADE LIBERALIZATION TRADE LIBERALIZATION PROCESS TRADE OPENNESS TRADE POLICY TRADE PROTECTION TRADE REFORM TRAINING COST TRAINING COSTS UNEMPLOYMENT UNILATERAL TARIFF REDUCTION UPWARD SHIFT WAGES WHITE COLLAR WORKERS WORKER WORKERS
spellingShingle	ABSOLUTE VALUE ADJUSTMENT COST ADJUSTMENT COSTS ADJUSTMENT PROCESS AGGREGATE EMPLOYMENT AVERAGE TARIFF BUSINESS CYCLE CAPITAL INPUTS CAPITAL STOCK CLERKS CONSTANT RETURNS CONSTANT RETURNS TO SCALE COST FUNCTIONS CREATING JOBS DEMAND SHOCKS DEMOCRATIC INSTITUTIONS DEREGULATION DOMESTIC MARKET ECONOMIC ACTIVITY ECONOMIC PERFORMANCE ELASTICITY ELASTICITY OF DEMAND EMPLOYMENT DYNAMICS EMPLOYMENT GROWTH EMPLOYMENT LEVEL ENDOGENOUS VARIABLES EXOGENOUS SHOCK EXOGENOUS VARIABLES EXPORT BIAS EXPORT MARKET EXPORT ORIENTATION EXPORT SHARES EXPORTS EXTERNAL TARIFF FACTOR GROWTH FACTOR LEVELS FACTOR MARKETS FACTORS OF PRODUCTION FINANCIAL CRISIS FISCAL POLICIES FIXED COSTS FUNCTIONAL FORM GDP GROSS OUTPUT GROWTH RATES HUMAN CAPITAL IMPACT OF TRADE IMPACT OF TRADE LIBERALIZATION IMPORT TARIFF IMPORT TARIFFS INCREASING RETURNS INDUSTRIAL SECTOR JOB CREATION JOB DESTRUCTION JOB DESTRUCTION RATES LABOR ADJUSTMENT LABOR SHORTAGES LABOR UNIONS LEVELS OF CAPITAL LOCAL FIRMS MARGINAL COST OPENNESS OPTIMIZATION POLITICAL ECONOMY PRODUCTION FUNCTION PRODUCTION FUNCTIONS PRODUCTIVITY PROFIT MAXIMIZATION PROTECTIONIST POLICIES READERS RELATIVE PRICES SEVERANCE PAYMENTS STATISTICAL ANALYSIS TARIFF BARRIERS TARIFF LEVELS TARIFF PROTECTION TARIFF REDUCTIONS TOTAL COSTS TOTAL EMPLOYMENT TOTAL FACTOR PRODUCTIVITY TRADE BLOCK TRADE LIBERALIZATION TRADE LIBERALIZATION PROCESS TRADE OPENNESS TRADE POLICY TRADE PROTECTION TRADE REFORM TRAINING COST TRAINING COSTS UNEMPLOYMENT UNILATERAL TARIFF REDUCTION UPWARD SHIFT WAGES WHITE COLLAR WORKERS WORKER WORKERS Casacuberta, Carlos Gandelman, Néstor Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay
geographic_facet	Latin America & Caribbean Uruguay
relation	Policy Research Working Paper; No. 3891
description	The authors use a panel of manufacturing firms to analyze the adjustment process in capital blue collar and white collar employment in Uruguay during a period of trade liberalization when average tariff protection fell from 43 to 14 percent. They calculate the desired factor levels arising from a counterfactual profit maximization in the absence of adjustment costs, generating a measure of factor shortages or surpluses. The average estimated output gap for 1982-95 is 2 percent. The authors' policy analysis shows that trade openness affected the adjustment functions of all three factors of production. Highly protected sectors adjust less when creating jobs (reducing labor shortages) than sectors with low protection. This may be due to fears of policy reversal in highly protected sectors. Also, highly protected sectors adjust more easily (than low protection sectors) when destroying jobs (reducing labor surpluses), especially in the case of blue collar labor. This suggests that trade protection may in fact destroy rather than create jobs within industries, as firms in highly protected sectors are more reluctant to hire and more ready to fire than firms in sectors with low protection. The results for capital are qualitatively similar but quantitatively smaller, suggesting that trade protection plays less of a role in explaining adjustment costs for capital. Interestingly, export-oriented sectors have lower adjustment costs for blue collar labor but not for white collar employment or capital, suggesting that export-led growth may be particularly successful in reducing blue collar unemployment.
format	Publications & Research :: Policy Research Working Paper
author	Casacuberta, Carlos Gandelman, Néstor
author_facet	Casacuberta, Carlos Gandelman, Néstor
author_sort	Casacuberta, Carlos
title	Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay
title_short	Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay
title_full	Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay
title_fullStr	Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay
title_full_unstemmed	Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay
title_sort	protection, openness and factor adjustment : evidence from the manufacturing sector in uruguay
publisher	World Bank, Washington, DC
publishDate	2012
url	http://documents.worldbank.org/curated/en/2006/04/6731296/protection-openness-factor-adjustment-evidence-manufacturing-sector-uruguay http://hdl.handle.net/10986/8720
_version_	1764405856633356288

Protection, Openness and Factor Adjustment : Evidence from the manufacturing sector in Uruguay

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