Ex-post evaluation of the employment effects of a preferential trade agreement: methodological issues, illustrated with a reference to Chile

Abstract

This paper presents a discussion of the major methodological issues relating to some key studies assessing the employment effects of a particular PTA using different methodologies (General and Partial Equilibrium, Gravitational models, Micro simulations, Econometrics using panel data, etc.). In this line, the paper discusses an accounting model for decomposing the ex - post employment performance as related to Latin America Preferential Trade Agreements (PTAs), proposing this method to evaluate the Chile - Mexico PTA as an illustration. The paper defines a research agenda using an Employment ex-post performance decomposition model, to disentangle the effects of different forces on changes in employment. Advantages from implementing this proposal include: a) Availability of a method that could be replicated to study the impacts of PTAs in other countries, both regarding output and employment; b) Development of improved databases for bilateral trade analysis and c) Estimation of sectoral capital stocks, which are an important subject of its own right, for development and growth analysis.