Economic recession, demand constraint and labour markets in a developing economy

Type Report
Title Economic recession, demand constraint and labour markets in a developing economy
Author(s)
Publication (Day/Month/Year) 2010
Publisher Munich Personal RePEc Archive
URL http://mpra.ub.uni-muenchen.de/27433/1/MPRA_paper_27433.pdf
Abstract
The paper develops a three-sector, specific factor, general equilibrium model with two high-skill sectors and unemployment of skilled labour. One of the two high-skill sectors produces a non-traded commodity whose aggregate demand consists of both domestic demand and an exogenously given foreign demand. The consequences of a decline in the foreign demand for the non-traded good resulting from worldwide economic recession on the skilled and unskilled labour markets in a developing economy have been examined. The analysis finds that the effects on the labour markets crucially hinge on the relative factor intensities of the two high-skill sectors and that through adoption of appropriate fiscal measures; the country can shield its workforce from the rage of global economic downturn.

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