Labor Market Distortions and Structural Adjustments in Developing Countries

The purpose of this paper is to provide a typology of different labor market configurations and investigate how two major structural adjustment policies, namely a trade liberalization reform and the relaxation of capital controls, affect the level of aggregate employment and the rate of unemployment. We consider a number of models starting from the traditional Australian approach. We then analyze a multiple sectors intertemporal setting and a model with uncertainty and search. We identify situations under which structural adjustment results in unemployment.