Labour Market Effects of Non-tariff Measures: A Computable General Equilibrium for the Food Processing Sector in Malaysi
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Labour Market Effects of Non‑tariff Measures: A Computable General Equilibrium for the Food Processing Sector in Malaysia Vickie Siew Hoon Yew1 · Abul Quasem Al‑Amin2 · Evelyn S. Devadason1 Published online: 28 September 2020 © Indian Society of Labour Economics 2020
Abstract Non-tariff measures (NTMs) affect the labour market indirectly through trade. However, much ambiguity surrounds the labour market effects of NTMs, as conditions of the labour market are somewhat contextual. With a specific focus on the highly regulated food processing sector in Malaysia, this paper examines the impact of reductions in ad valorem equivalents of NTMs on employment and wages using a computable general equilibrium model. The simulations indicate positive gains to employment following reductions in NTMs in the short and long run. In the long run, employment gains and wage losses are observed for the unskilled group. The findings justify the need to complement the NTM reform with other mechanisms to address the likely rise in low-quality jobs in the food processing sector. Keywords Employment · Wages · Non-tariff measures · Computable general equilibrium · Malaysia JEL Classification F16 · F10 · F19
* Evelyn S. Devadason [email protected] Vickie Siew Hoon Yew [email protected] Abul Quasem Al‑Amin [email protected] 1
Faculty of Economics and Administration, University of Malaya, 50603 Lembah Pantai, Kuala Lumpur, Malaysia
2
Institute of Energy Policy and Research, Universiti Tenaga Nasional, Jalan Ikram‑Uniten, 43000 Kajang, Selangor Darul Ehsan, Malaysia
13
Vol.:(0123456789) ISLE
630
The Indian Journal of Labour Economics (2020) 63:629–656
1 Introduction The use of non-tariff measures (NTMs)1 to regulate trade has been increasing since the 1990s (Gourdon 2014; WTO 2012). Governments have imposed NTMs for a variety of legitimate non-trade objectives, such as to protect human, animal and plant health, the environment, and for national security purposes. NTMs, though legitimate, can also act as barriers to trade when their implementation increases compliance costs to firms (Peterson et al. 2013; Disdier and Van Tongeren 2010; Chen et al. 2008; Peterson and Orden 2008; Fontagné et al. 2005; Moenius 2004; Otsuki et al. 2001). Alternatively, NTMs can also enhance trade when they reduce the problems arising from asymmetric information between buyers and sellers (Schuster and Maertens 2015; Athukorala and Jayasuriya 2003). Through trade, NTMs can also affect the labour market. According to the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP 2016), the implementation of NTMs will have a direct effect on trade and prices and an indirect effect on the labour market. Changes in these factors will then alter the labour market in terms of employment and wages. Several studies have analysed the impact of NTMs on the labour market (Leonardi and Meschi 2016; Stone and Cepeda 2012; Bustos 2011; Francois et al. 2009; Verhoogen 2008; Haskel and Slaughter 2003). They describe the way in which NT
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