Trade liberalisation and employment intensity of sectoral output growth: Lessons from Tunisia

Abstract

The purpose of this article is to assess the relationship between trade liberalisation in Tunisia and the employment intensity of sectoral output growth, in order to examine the claim that free trade creates jobs by stimulating growth. Using panel data for 15 Tunisian sectors over the period 1983-2010, we compare estimated sectoral outputemployment elasticities prior to and following the Free Trade Agreement process with the European Union. The results provide evidence that trade liberalisation in Tunisia has led to an increase in the intensity of employment in exporting manufacturing sectors like textiles, clothing and leather industries, and mechanical and electrical industries. However, their ability to generate jobs in response to value-added growth remains weak. Conversely, since the Free Trade Agreement process, the most labour-intensive service sectors, notably tourism and miscellaneous services, have shown a significant decrease in the employment intensity of their output growth. Our findings suggest that the Free Trade Agreement with the European Union has not really fostered the shift of the Tunisian Economy towards a more inclusive model and support the argument for a reorientation of investment policy in favour of sectors generating more job opportunities.

The Effect of Economic Growth on Employment in GCC Countries

“…From their part, Ghazali et al (2018) point out that import penetration may be responsible for the negative impact of trade openness on employment elasticity. Our findings partially corroborate those of Goaied and Sassi (2015), as trade openness positively affects employment elasticity in the long-run. It is worth noting that the trade openness proxy employed in this study considers both de jure and de facto trade policy measures and is more relevant than those used in previous studies.…”

“…The impact may depend on the liberalized sector and the liberalization process. Goaied and Sassi (2015) conclude that Tunisia's trade liberalization process enhanced the employment intensity only in some exporting manufacturing sectors. On the contrary, Bruno et al (2004) argue that trade openness may negatively affect the growth-employment relationship by facilitating firms' access to capital equipment from abroad.…”

“…In this context, Döpke (2001) suggests that a wide range of factors could drive employment elasticity, including the share of services in real GDP, real labor costs, and labor market institutions. Goaied and Sassi (2015) focus on the impact of trade liberalization on employment elasticity in 15 economic sectors in Tunisia during the period 1983-2010. The authors estimate employment elasticity before and after the Free Trade Agreement with the European Union and then compare elasticities.…”

“…It is worth noting that the trade openness proxy employed in this study considers both de jure and de facto trade policy measures and is more relevant than those used in previous studies. For instance, Goaied and Sassi (2015) estimate the employment intensity of growth before and after the signature of the Free Trade Agreement between Tunisia and the European Union and then compare elasticities. When carrying out such an analysis, one should be cautious, as the difference in elasticities before and after the Free Trade Agreement signature may be due to factors other than the agreement.…”

Employment intensity and Sectoral Output Growth: A Comparative Analysis of Egyptian and Jordanian economies

“…To provide a measure of the employment intensity of growth for the different sectors in Egypt and Jordan, we use the methodology adopted by Goaied and Sassi (2015). We estimate the em-ployment intensity of sectoral output growth using a linear demand model where the number of employees in each sector is regressed on its value added, according to the following equation:…”