| Abstract: |
Using a modified version of the dependent economy framework, this paper
analyzes a stylized small economy that is significantly open to trade and
investment flows. The analysis, which is inspired by the structure of
Cambodia's economy and ongoing efforts by international organizations to raise
labor standards in that country, initially classifies the economy into three
sectors: a manufacturing sector that produces tradable goods, a sector that
produces (tourism-related) tradable services, and a rural sector that produces
non-tradables. By assuming sectoral differences based on stylized facts, we
attempt to analyze the consequences of various shocks in a comparative static
framework. Furthermore, we evaluate the short- run effects of raising labor
standards. Finally, we explore the impact of higher standards in the
manufacturing sector on the near- and long-term prospects of the economy using
comparative dynamic analysis to analyze changes in output, relative prices,
income distribution and accumulation. JEL Categories: |