Modelling Labour Market Adjustment to Trade Liberalisation in an Industrialising Economy

This paper investigates labour market responses to trade liberalisation in an industrialising country. Short and long run responses of employment and wages are examined using a specific factor trade model, which underpins the empirical work. Employment and wage equations are estimated using dynamic panel techniques for importable and exportable sectors in Mauritius and for a period covering both the pre‐ and post‐liberalisation regimes. The empirical testing finds some support for the theoretical predictions of differential responses between sectors. Incre ases in female participation, however, appear to have dampened the adjustment burdens of liberalisation on importables