Abstract

This paper examined the impact of increased openness to international trade on labour employment and income inequalities among 20 sub-Saharan African countries for the period between 1980 and 2002. The paper employed a panel vector autoregressive (Panel VAR) model to account for endogeniety in the variables in the model. The study used both the aggregated and disaggregated measures of the trade openness. The aggregated trade openness measure regression showed that increased international trade resulted in significantly increasing income inequalities but had insignificant impact on labour employment. In the disaggregated trade openness regression, results show that on the overall, the export side reduced labour employment but at the same time, significantly increased income inequalities. The import side however, had an insignificant impact on income inequalities but a slight positive impact on labour employment. This seemed to hold for the high income countries, but also the low income countries. Among the possible tools to help reduce inequalities is for government to engage more in policies that will increase labour participation rates both in production and marketing. Secondly, use of a government determined optimal tax level on production systems that are highly capital intensive and then channeling the revenue into labour intensive production channels. Lastly strengthening competitiveness both in the goods market and labour market would also help reduce income inequalities. This would reduce exploitation of both the labour resource and consumers by the capitalist monopolists.

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School	: School of Law, Economics and Government
Issued Date	: 2012

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