Adjustment Policies, Poverty, and Unemployment

Pierre-Richard Agénor's pioneering work on Integrated
Macroeconomics Models for Poverty Analysis (IMMPA) is cataloged for
the first time in this must-read volume.

A class of dynamic computable general equilibrium models, IMMPA
models are designed to analyze the impact of adjustment policies on
unemployment and poverty in the developing world. Including both
papers originally circulated through the World Bank, as well as new
material that places this important work in its larger context,
Adjustment Policies, Poverty, and Unemployment details the
history and uses of these models to date, as well as pointing to
future developments for their utilization.

Auteur

Pierre-Richard Agénor is Hallsworth Professor of
International Macroeconomics and Development Economics at the
University of Manchester, and co-director of the Centre for Growth
and Business Cycle Research. His research interests include
international macroeconomics, development economics, and growth
theory. He has published widely in leading professional journals
and is the author of several best-selling books, including
Development Macroeconomics (with Peter Montiel) and The
Economics of Adjustment and Growth.

Alejandro Izquierdo is Senior Economist in the Research
Department of the Inter-American Development Bank and a former
economist at the World Bank. His current research focuses on
international finance and open-economy macroeconomics, with a
particular interest in the analysis of sudden stops in capital
flows.

Henning Tarp Jensen is Assistant Professor and member of
the Development Economics Research Group (DERG) at the Institute of
Economics, University of Copenhagen. He has a well-established
publication record within the area of computable general
equilibrium modeling and a long-standing research interest in low-
and middle-income countries, including Mozambique and Vietnam, as
well as Argentina, Brazil, Bolivia, Colombia, and Turkey.

Résumé
Pierre-Richard Agénor's pioneering work on Integrated Macroeconomics Models for Poverty Analysis (IMMPA) is cataloged for the first time in this must-read volume. A class of dynamic computable general equilibrium models, IMMPA models are designed to analyze the impact of adjustment policies on unemployment and poverty in the developing world. Including both papers originally circulated through the World Bank, as well as new material that places this important work in its larger context, Adjustment Policies, Poverty, and Unemployment details the history and uses of these models to date, as well as pointing to future developments for their utilization.

Contenu

Acknowledgments xiii

About the Editors xv

Introduction and Overview 1
Pierre-Richard Agénor, Alejandro Izquierdo, and Henning Tarp Jensen

1 The Analytics of Segmented Labor Markets 8
Pierre-Richard Agénor

1.1 Overview of Labor Markets 9

1.1.1 Basic Structure 9

1.1.2 Composition of Employment 11

1.1.3 Public Sector Pay and Employment 12

1.1.4 Labor Market Institutions and Regulations 13

1.1.5 Unemployment 22

1.2 Urban Labor Mobility and the Harris-Todaro Framework 24

1.3 Wage Formation in the Formal Sector 27

1.3.1 Efficiency Wages 28

1.3.2 Trade Unions 42

1.3.3 Bilateral Bargaining 44

1.3.4 Job Search 45

1.3.5 Adverse Selection Models 47

1.4 A Shirking Model with Segmented Markets 47

1.4.1 The Economy 48

1.4.2 Equilibrium with Skilled Unemployment 51

1.4.3 Labor Mobility and Unskilled Unemployment 56

1.4.4 Increase in the Minimum Wage 59

1.5 Concluding Remarks 62

Appendix: The Impact of a Change in the Minimum Wage 63

2 The Macroeconomics of Poverty Reduction 67
Pierre-Richard Agénor

2.1 A Distorted Agenda 69

2.1.1 A Topic Neglected by Macroeconomists 69

2.1.2 An Excessive Focus on Micro Aspects and Measurement Issues 72

2.1.3 The Confusion over Pro-Poor Growth 73

2.2 Transmission of Macro Shocks to the Poor 79

2.2.1 The Central Role of the Labor Market 79

2.2.2 Changes in Aggregate Demand 80

2.2.3 Expenditure Deflators and Inflation 81

2.2.4 The Real Exchange Rate and the Supply Side 82

2.2.5 Macroeconomic Volatility 83

2.2.6 Growth and Distributional Effects 84

2.2.7 Recessions and Crises: Asymmetric Effects 85

2.3 Theoretical Models for Poverty Analysis 86

2.3.1 A Two-Household Framework 86

2.3.2 Equilibrium 92

2.3.3 Cut in Government Spending 94

2.4 Some Research Directions 96

2.4.1 Poverty Traps 96

2.4.2 Asymmetric Effects of Output Shocks 100

2.4.3 Welfare Costs of Macroeconomic Volatility 100

2.4.4 UnemploymentPoverty Trade-offs 101

2.4.5 Can Redistribution Hurt the Poor? 102

2.5 Concluding Remarks 104

Appendix A: Asymmetric Effects of Output Shocks 106

Appendix B: Dynamic Structure and Stability Conditions 108

3 The Mini Integrated Macroeconomic Model for Poverty Analysis 110
Pierre-Richard Agénor

3.1 Structure of Mini-IMMPA 113

3.1.1 Production 113

3.1.2 The Labor Market 116

3.1.3 Supply and Demand 125

3.1.4 External Trade 126

3.1.5 Prices 127

3.1.6 Profits and Income 129

3.1.7 Private Consumption and Savings 130

3.1.8 Private Investment 130

3.1.9 Public Sector 132

3.1.10 Balance of Payments 133

3.1.11 Poverty and Distributional Effects 136

3.2 Policy Experiments 138

3.2.1 Reduction in the Minimum Wage 139

3.2.2 Cut in Payroll Taxes on Unskilled Labor 148

3.3 Conclusions 169

Appendix: Calibration and Parameter Values 171

4 Unemployment and Labor Market Policies in Morocco 178
Pierre-Richard Agénor and Karim ElAynaoui

4.1 The Labor Market in Morocco 180

4.1.1 Basic Structure 180

4.1.2 Employment, Unemployment, and the Returns to Education 181

4.1.3 Regulatory and Institutional Features 185

4.1.4 Wage Flexibility 188

4.1.5 Domestic and International Labor Migration 189

4.1.6 Constraints and Challenges 191

4.2 A Quantitative Framework 193

4.2.1 Production 193

4.2.2 Wages, Employment, Migration, and Skills Acquisition 197

4.2.3 Supply and Demand 204 4.2.4 External Trade 206&l...