Labor market regulations, trade liberalization and the distribution of income in bangladesh

Abstract

We examine the effects of labor market rigidities on the outcome of trade liberalization using a general-equilibrium model of Bangladesh. When there are no labor market distortions, the poorest households experience a real-wage increase following trade liberalization. When there are either severance pay regulations or minimum wages, the poorest households bear the burden of adjustment. When both sets of regulations are in effect, the net result is not very different from the case where there are no regulations.

Keywords:

• Bangladesh
• Labor markets
• Trade liberalization
• CGE models