Abstract
After more than two decades of trade liberalization, faced with deep structural problems which were exacerbated by the 2008 financial crisis and culminated in the 2011 Spring Revolution and government change, in 2016 Egypt started to protect some sectors from foreign competition. This paper assesses how tariff reforms during the 1998–2018 period affected the Egyptian labour market by focusing on real wages and job stability (i.e. having a permanent position). The empirical analysis is carried out on worker-level data from the available four waves of Egyptian Labour Market Panel Survey (ELMPS), including the recently released 2018 wave. We find that higher tariff protection tends to worsen labour market conditions, both lowering real wages and decreasing the probability of finding a stable job. Furthermore, tariff changes show remarkable asymmetries. There is a negative and significant correlation between tariffs increases and real wages, while the positive impact of tariff reductions turns out to be negligible and insignificant. Our findings support the view that in Egypt protectionism hampered working conditions, contributing to inequality, while liberalizations did not improve nor deteriorate them.
Highlights
The process of trade liberalization and market-oriented reforms that started in the early 1980s and intensified in the 1990s triggered developing countries’ integration in the global market
To further control for omitted time-invariant characteristics, we investigate the effect of tariff increases on wage increases
In line with our previous findings, tariff changes are negatively correlated with real wage changes, other things equal
Summary
The process of trade liberalization and market-oriented reforms that started in the early 1980s and intensified in the 1990s triggered developing countries’ integration in the global market. Their exports reached almost half of total world exports Rodríguez and Rodrik (2000), on the other hand, claimed that “the relationship between trade policy and economic growth remains very much an open question” and “is far from having been settled on empirical grounds.”. More recently the view that trade reforms generate substantial improvements in developing countries has again found empirical support (for a recent review, see Pavcnik 2017; Irwin 2019) Earlier papers (see for all Dollar 1992; Edwards 1998) supported the idea that openness to trade was associated with better economic outcomes. Rodríguez and Rodrik (2000), on the other hand, claimed that “the relationship between trade policy and economic growth remains very much an open question” and “is far from having been settled on empirical grounds.” More recently the view that trade reforms generate substantial improvements in developing countries has again found empirical support (for a recent review, see Pavcnik 2017; Irwin 2019)
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