Ensuring Structural Transformation Supports Better Jobs by Michael G. Plummer, Eni Professor of Economics, The Johns Hopkins University, SAIS

Transcription

1 Ensuring Structural Transformation Supports Better Jobs by Michael G. Plummer, Eni Professor of Economics, The Johns Hopkins University, SAIS Presentation to ADB/ILO Consultative Workshop : ASEAN Community 2015: Managing Integration for Better Jobs and Shared Prosperity 5-6 November, 2013, Bangkok Based on the paper, Assessing the Impacts of ASEAN Economic Integration on Labor Markets Michael G. Plummer, Fan Zhai and Peter A. Petri (Johns Hopkins University, China Investment Corporation, Brandeis University) Slide 1

2 Economic Integration and Labor Trade is good for growth in general but the effect of tradeinduced growth on labor is more nuanced. Trade leads to distributional questions, as the «winners» and «losers» are different actors. The debate is no longer about if governments should take active intervention measures, but rather when and how.

3 ASEAN Economic Integration and Structural Change ASEAN has a relatively-long history of economic cooperation, but the ASEAN Economic Community (AEC) has taken it to a whole new level. In essence, the objectives of the AEC are to: Increase the size of the economic pie («unified market», «competitive econoomic region») Grow the pie through integration with the world («integrate into the global economy») Effect a better distribution of the pie («equitable econ region»). In our paper, we shed light (empirically) on all three.

4 Facing Structural Change in ASEAN Context While there is great diversity in ASEAN, the region has shared fantastic economic growth fuelled by trade and FDI. As the region s predominantly middle-income economies (8/10) continue up the development ladder, structural unemployment is more of a threat, and increasingly difficult to count on sheer rapid growth to reduce frict. unemployment. There is a need to: anticipate and manage the potential negative effects of globalization ensure that gains flow to all sections of society, particularly the poor and vulnerable avoid protectionism Active government policies (including a general safety-net) to ensure equitable distribution of gains, reduce poverty, and close development gaps are particularly important to ASEAN.

5 Assessing the Impacts of ASEAN Economic Integration on Labor Markets The objectives of our study are to estimate the effects of: AEC-related initiatives on welfare, exports, economic structure, and other aggregate economic variables Extra-regional initiatives (RCEP) on these variables Internal and external initiatives on labor in general and by occupation and gender in particular Doing this allows us, inter alia, to get a better idea of the distributional effects of ASEAN-centered initiatives

6 The Model Used Structure Data Tariffs Based on Petri, Plummer and Zhai (2012) (see website: asiapacifictrade.org) Multi-country (21 regions), multi-sector (21) general equilibrium model of the world economy. Monopolistic competition with heterogeneous firms. The model generates productivity gains in addition to welfare triangles. The evolution of economies over time is simulated with annual solutions, allowing for the analysis of changes in investment paths. For selected ASEAN countries, a more realistic labor market structure than hitherto attempted is incorporated through decomposition of labor force into occupation and gender GTAP V database, updated with other projections and featuring 5+ occupations, gender GTAP tariff data NTBs Tariff equivalents from World Bank estimates References. Fan Zhai, Armington meets Melitz: introducing firm heterogeneity in a global model of trade, Journal of Economic Integration, 2008; Zakariah Rashid, Fan Zhai, Peter A. Petri, Michael G. Plummer and Chia Siow Yue, Regional Market for Goods, Services and Skilled Labor, in Michael G. Plummer and Chia Siow Yue, eds. Realizing the ASEAN Economic Community, ISEAS, Services Tariff equivalents from PIIE estimates

7 Scenarios AFTA: ASEAN FTA Removal of the remaining intra-regional tariff barriers over the period of AFTA+: AFTA plus liberalization of NTBs 50% of intra-regional NTBs for both goods and services are phased out over the period of NTBs are represented by both rent-generated tariff equivalent and "iceberg costs". AEC: AFTA+ plus trade facilitation that lowers fixed trade costs Intra-regional fixed trade costs are gradually cut by 20% over the period of RCEP: AEC plus regional FTA with 6 partners; 40% reduction in remaining goods NTBs; 30% reduction in services NTBs; 20% decrease in trade costs over Due to time constraints, we mostly focus on details of AEC (see RCEP in appendix and paper for further information).

8 Welfare Gains and Trade Impact for ASEAN EV as % of GDP AFTA AFTA+ AEC RCEP Exports ( % change from baseline) AFTA AFTA+ AEC RCEP Slide 8

9 Quick Summary of Results ASEAN-centered integration programs should have a large effect on GDP growth, exports, and overall employment in ASEAN economies. Employment gains are significant in most countries, with most sectors expanding and some contracting in all countries (with only slight changes in services in VN). Skilled wage gains exceed semi-skilled labor gains in every scenario. Returns to labor increase in all scenarios. However, the distribution of the gains differs across the region; in AEC scenario, in terms of factor prices, labor gains relative to capital and labor only in Indonesia and Cambodia (and differences are small). On the other hand, in no country do both land and capital gains exceed gains to labor.

10 Changes in sectoral employment, AEC (thousand persons) Lao PDR Lao PDR Indonesia Indonesia Cambodia Cambodia

11 Changes in sectoral employment, AEC (thousand persons) Phlippines Phlippines Thailand Thailand Viet Nam Viet Nam

12 Conclusion ASEAN economic integration programs will have strong and positive effects on all countries in the region In general, the deeper and wider the integration programs, the greater the gains While there is often an associated large increase in employment and wages, the distribution of these gains tends to be uneven across the region, and structural change in certain economies is significant Hence, our conclusions support the need for active government policies to facilitate adjustment, improve the distrubition of the gains, and mitigate the distribution of the losses.

13 Appendix Slide 13

14 Welfare Gains in 2025 (EV as % of GDP) AFTA AFTA+ AEC RCEP Indonesia Malaysia Phlippines Singapore Thailand Viet Nam Cambodia Lao PDR Rest of ASEAN Slide 14

15 Factor price changes in AEC (% change from baseline) Indonesia Philippines Lao PDR Viet Nam Cambodia Thailand Wage Managers Professionals Para-professionals Clerks workers Craft workers Unskilled labor Male labors Female labors Land rental price Capital rent rate Slide 15

16 Factor price changes in 2025 RCEP (% change from baseline) Indonesia Philippines Lao PDR Viet Nam Cambodia Thailand Wage Managers Professionals Para-professionals Clerks workers Craft workers Unskilled labor Male labors Female labors Land rental price Capital rent rate Slide 16

17 Changes in sectoral employment, 2025 RCEP (thousand persons) Lao PDR Lao PDR Indonesia Indonesia Cambodia Cambodia

18 Changes in sectoral employment, 2025 RCEP (thousand persons) Phlippines Phlippines Thailand Thailand Viet Nam Viet Nam