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A Proximity-Based Approach to Labor Mobility in CGE Models with an Application to Sub-Saharan Africa

Author: Hans Lofgren; Martin Cicowiez
Publisher: Washington, D.C. : The World Bank, 2017.
Series: Policy research working papers.; World Bank e-Library.
Edition/Format:   eBook : Document : International government publication : EnglishView all editions and formats
Summary:
The ease with which workers can move between sectors has a strong impact on the effects on labor markets of shocks such as changes in world prices or migration flows. This paper introduces an approach to labor mobility with frictions under which worker capabilities (their efficiencies in different sectors) depend on their sector affiliation. If workers in sector a move to sector a', their efficiency shortfall due to  Read more...
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Additional Physical Format: Print Version:
Lofgren, Hans
A Proximity-Based Approach to Labor Mobility in CGE Models with an Application to Sub-Saharan Africa.
Washington, D.C. : The World Bank, 2017
Material Type: Document, Government publication, International government publication, Internet resource
Document Type: Internet Resource, Computer File
All Authors / Contributors: Hans Lofgren; Martin Cicowiez
OCLC Number: 1004237886
Description: 1 online resource (47 pages).
Series Title: Policy research working papers.; World Bank e-Library.
Responsibility: Hans Lofgren.

Abstract:

The ease with which workers can move between sectors has a strong impact on the effects on labor markets of shocks such as changes in world prices or migration flows. This paper introduces an approach to labor mobility with frictions under which worker capabilities (their efficiencies in different sectors) depend on their sector affiliation. If workers in sector a move to sector a', their efficiency shortfall due to a capability misfit compared to what is needed in a' (and possessed by workers already in a') is measured by a proximity parameter, 0? proxa, a'? 1. If proxa, a' <1, the efficient quantity reaching a' is below the physical quantity. In this setting, profit-maximizing producers are willing to pay the same wage per efficiency unit irrespective of worker origin and thus pay less efficient workers a lower wage per physical unit. This approach to labor mobility is tested in a static CGE model that is applied to an illustrative sub-Saharan African dataset with sector proximities defined using the approach of the product-space literature. Simulations of positive export price shocks show that, the higher the proximities, the stronger the labor reallocation and the welfare gains.

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