Developing Country Labor Market Adjustments to Trade Reform

2006

Trade liberalization presents many opportunities for producers and consumers but may also induce significant economic adjustments. While competitive firms prosper and grow, others may contract or change their production patterns. Adjustment is particularly challenging for workers whose skills are in less demand. Many developed countries provide these workers assistance, such as income support and retraining, but few developing countries can afford such programs. Leaders of these countries may hesitate to liberalize unless they are confident they can manage adjustments. In this overview and resource guide, produced for USAID, we explore how trade reform affects workers and labor markets in developing countries. We also review a wide range of donor and government-sponsored programs devised to facilitate adjustment and assist individual workers. We identify best practices and recommend steps that governments and donors can take to make adjustment assistance more effective.

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