Abstract:
Most debates about the role of tariff cuts on the level of employment and rate of wages in labor market have come out of well-known Hecscher – Ohlin and Stopler – Samuelson (HOS) theorems. Considering the fact that we have divided the workforce into skilled and unskilled labors; the present paper assesses the impacts of tariff cuts on labor market indicators in Iran. To address these issues, a computable general equilibrium (CGE) modeling approach and social accounting matrix (SAM) of 2002 have been applied. Results show that general import tariff cuts along with the decreasing wage inequality increase the level of total employment, while tariff cuts in unskilled labor-intensive commodities such as those of agricultural commodities decrease the level of total employment, and consequently lead to an increase in wage inequality. However, under the effect of the tariff cuts in skilled labor-intensive commodities like food, apparel and textile, level of total employment increases and wage inequality decreases, respectively.
Machine summary:
"Impacts of Import Tariff Cuts on the Iranian Labor Market Structure: a Computable General Equilibrium Model Approach Mohamad Mahdi Barghi Oskooee 1 Department of Economics, Faculty of Economics, Management and Business, University of Tabriz, Tabriz, Iran Abstract Most debates about the role of tariff cuts on the level of employment and rate of wages in labor market have come out of well-known Hecscher – Ohlin and Stopler – Samuelson (HOS) theorems.
However, under the effect of the tariff cuts in skilled labor-intensive commodities like food, apparel and textile, level of total employment increases and wage inequality decreases, respectively.
Acemoglu (2003) also studied the impact of capital goods import to follow trade openness and their effects on the growth of the demand of skilled labors in developing countries.
Whereas, in the countries with the abundance of capital, following trade openness through import tariff cuts, the demand of unskilled labors decreases and as a result it leads to lower down the wages of unskilled labor compare to the skilled ones.
In this article, by using the computable general equilibrium model and social accounting matrix of 2002, the effect of trade openness through the import tariff cuts on the level of employment and the rate of wages based on different scenarios related to general tariff cuts policy and tariff cuts policy for food, apparel, textile and agricultural commodities agricultural, food, apparel and textile commodities through GAMS software have been simulated."