Labour Market Effects of Non-Tariff Measures: A Computable General Equilibrium for the Food Processing Sector in Malaysia

Abstract

Non-tariff measures (NTMs) affect the labour market indirectly through trade. However, much ambiguity surrounds the labour market effects of NTMs, as conditions of the labour market are somewhat contextual. With a specific focus on the highly regulated food processing sector in Malaysia, this paper examines the impact of reductions in ad-valorem equivalents of NTMs on employment and wages using a computable general equilibrium (CGE) model. The simulations indicate positive gains to employment following reductions of NTMs the short- and long-run. In the long-run, employment gains and wage losses are observed for the unskilled group. The findings justify the need to complement the NTM reform with other mechanisms to address the likely rise of low-quality jobs in the food processing sector.

Keywords: employment, wages, non-tariff measures, computable general equilibrium, Malaysia

JEL Classification: F16, F10, F19