Motivations and Objective Outline Commodities transformation and unemployment Econometric models, identification strategy and data Econometric Results Conclusion and policy implications "Primary agricultural commodity trade and labour market outcomes" Alassane DRABO ∗ ∗ FERDI - Fondation pour les Etudes et Recherches sur le Developpement International African Economic Conference 2014 - Knowledge and innovation for Africa s transformation Addis Ababa, 1 - 3 November 2014 Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric models, identification strategy and data Econometric Results Conclusion and policy implications Motivations Growing debate in the relationship between trade openness and labour market But the role played by different components of trade remains less investigated African countries are generally characterized by the large share of raw commodities in their exports Objective Assess empirically the impact of primary agricultural commodity exports on unemployment and employment. Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric models, identification strategy and data Econometric Results Conclusion and policy implications Outline Relationship between Trade and unemployment Primary commodities transformation and unemployment Econometric specification and estimation The endogeneity bias Data and variables Econometric results Conclusion and policy implications Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric models, identification strategy and data Econometric Results Conclusion and policy implications At least three arguments can be put forward to support the positive association between primary commodity exports and unemployment the transformation process of the raw products itself can be considered as additional activities in the economy the production of raw commodity as well as other products may be expanded the processing may increase private and public resources, and thus encourage investment in human capital, easing its integration into job market. Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric models Econometric models, identification strategy and data Econometric models Econometric Results Conclusion and policy implications Econometric specification and estimation � Our econometric model of interest is: Unemploy i = � Trade i + � Trade i ×Agriprim i + � Agriprim i +X i ’ � + � i Where � Unemployi is the logarithmic form of unemployment rate of country i. � Agriprim the agricultural primary commodity exports to imports ratio (Export/Imports), � Trade×Agriprim represents its interaction with total trade. � is expected to be positive ( � >0). � X is the matrix of control variables commonly used in the literature. Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric models Econometric models, identification strategy and data Econometric models Econometric Results Conclusion and policy implications Estimation strategy We use instrumental variables approaches (2SLS and GMM) for which we consider two types of instruments: external instruments: Frankel and Romer (1999), Rose (2004) Internal instruments The quality of these instruments is tested by accurate statistics. Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric models Econometric models, identification strategy and data Econometric models Econometric Results Conclusion and policy implications Stand. Variables Mean Min. Max. Sources Dev. International Finance Unemployment rate 8.690 2.76 19.867 3.795 Statistics (IMF) International Finance Employment rate 53.571 37.54 74.91 7.119 Statistics (IMF) UN COMTRADE Trade 235.382 30.925 1270.393 204.668 Database Agricultural Primary UN COMTRADE Commodity 1.628 0.064 8.741 1.634 Database (Export/Import) Agricultural land (% 42.741 3.162 84.971 20.932 WDI Total land) Labor Union 0.486 0.148 0.827 0.187 Botero et al. (2004) Employment Law 0.458 0 0.7143 0.197 Botero et al. (2004) Working Age Population 20.965 18.739 25.119 1.421 WDI 4.33e+1 3.04e+0 GDP (Constant $) 8.19e+12 1.20e+12 WDI 1 9 Labour Force 68.508 49.058 83.682 6.960 WDI Participation Black Market Prenium 1.95 0 42 5.820 Fraser Institute Agricultural Employment 9.061 0.291 40.281 10.073 WDI Frankel and Romer Estimation based on 0.222 0.039 1.372 0.191 instrument data from CEPII Estimation based on Remoteness 8.706 8.322 9.485 0.340 data from CEPII Landlock 0.116 0 1 0.323 CEPII Note: WDI refers to World Bank World Development Indicator and CEPII stands for CEPII Geography database Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric Results Econometric models, identification strategy and data Econometric Results Conclusion and policy implications Table 1: Effect of Trade on Unemployment Rate � (1) (2) Total Trade (%GDP) Unemployment Rate (First stage) (2SLS) Total Trade -0.007 *** (3.23) 5.885 *** Labor Union 49.396 (0.41) (2.58) Employment Law -96.549 -1.737 (0.95) (0.74) -124.292 *** -1.661 ** Working Population (3.98) (2.16) Log GDP 96.351 *** 0.928 (3.78) (1.23) -0.229 *** Labor Participation 0.739 (0.32) (3.59) Black Market Prenium 1.383 0.007 (1.23) (0.29) 720.258 *** Frankel and Romer instrument (9.19) Remoteness 105.262 * (1.71) Landlock 48.202 (0.99) 41.209 *** Constant -104.031 (0.14) (5.25) Observation 55 55 R² 0.75 0.26 Partial R² 0.57 Fisher Stat P-Value 0.000 Hansen OID p-value 0.182 Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
Motivations and Objective Outline Commodities transformation and unemployment Econometric Results Econometric models, identification strategy and data Econometric Results Conclusion and policy implications Table 2: Effect of Total Trade on Unemployment Rate: Role of the share of Exports and Imports of Primary agricultural commodity ratio (1) (2) (3) (4) Total Trade Primary (Trade)x(Primary Unemployment (%GDP) Commodity Commodity) Rate (First stage) (Firststage) (First stage) (2SLS) Total Trade -0.007 * (1.77) Agricul. Primary Commodity -1.894 (1.29) 0.014 * (Trade)x(Agricul. Primary Commodity) (1.66) 10.967 *** Labor Union -46.822 -1.495 -420.905 (0.32) (1.34) (1.11) (2.86) Employment Law -61.542 0.040 -181.487 -0.637 (0.55) (0.03) (0.66) (0.19) Working Population -136.231 *** -0.105 -368.080 *** 4.835 (3.53) (0.19) (3.43) (1.62) 102.363 *** 208.477 ** -4.287 * Log GDP -0.438 (3.28) (0.83) (2.39) (1.75) -0.265 *** Labor Participation 2.222 0.024 5.412 (0.95) (0.83) (0.87) (3.88) Black Market Prenium 1.473 -0.025 -4.670 0.017 (1.13) (0.70) (1.55) (0.48) Log Agricultural Employ 19.002 -0.422 66.102 -3.403 *** (1.06) (0.89) (1.10) (2.64) Frankel & Romer instrument (Total 1279.807 ** 8.262 * 411.880 trade) (2.20) (1.85) (0.35) Landlocked 17.990 -1.341 *** -324.103 *** (0.46) (2.72) (2.84) Frankel & Romer instrument (trade x -712.471 -15.252 ** -1251.819 Agricul. Primary Commodity) (0.95) (2.50) (0.84) Frankel & Romer instrument (Agricul. 115.664 2.460 *** 170.434 Primary Commodity) (1.06) (2.97) (0.76) Constant 757.240 * 10.963 *** 3940.254 *** 7.397 (1.74) (2.73) (3.47) (0.38) Observation 54 54 54 54 R² 0.89 0.75 0.74 0.86 Partial R² 0.56 0.40 0.23 Fisher Stat P-Value 0.00 0.00 0.00 Hansen OID p-value 0.430 � Alassane DRABO "Primary agricultural commodity trade and labour market outcomes"
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