Agriculture Reference
In-Depth Information
hence reduces the rse n the producton real wage due to the reforms.
The GDP gan s therefore almost doubled and now only the processed food
sector contracts in the short run. Interestingly, the additional investment
and greater employment generated wth the polcy regmes of columns 2
and 3 ensure that real land rents rise in the short run.
Finally, the three right hand columns of Table A10.4 indicate the short-run
effects of the WTO accesson reforms under the same three polcy regmes
but wth the more optmstc ancllary effects of those reforms (Table A10.2)
included. There are two key differences. First, investors are motivated
by the effects of ncreased productvty n response to the reforms n the
long run and, second, services reforms see a short run increment to the
capital stocks in the financial and communications sectors. These changes
cause substantial increases in investment and, in association, they cause
larger net inflows on the capital account; they also boost the construction
sector and reduce the cost of service inputs to other sectors. Overall,
expansons are consstently larger n these cases as s the demand for the
sectoral relocation of workers. These are due, in part, to the increases in
total employment that occur because of stcky nomnal wages. The upward
movement in nominal wages is slower than that in labour productivity,
expandng aggregate labour demand by up to 2 per cent.
Short run sectoral mpacts
The key determnants of the sectoral mx of changes n the economy are
the tarff reductons; these reduce product prces n affected sectors and
the size of the resulting short run real depreciation, which reduces non
traded (largely servces) prces relatve to traded goods prces. When
captal controls are tght the real deprecaton s comparatvely large.
Traded sectors, such as light manufacturing, are advantaged, while
non traded services sectors, such as construction and dwellings, are
disadvantaged. On the other hand, when capital controls are ineffective,
manufacturng gans are smaller and the non traded servces sectors gan.
Processed food suffers because of the declne n ts protecton and other
agrcultural ndustres contract as that sector demands fewer local nputs.
When the macroeconomic policy regime is expansionary, however, only
