concerning the recent "free trade with Africa" bill, Brad DeLong writes:
>... Effects on African economies may be substantial. Average labor
>productivity in both Africa and the U.S. rises. Real wages in Africa for
>urban workers surely rise, and for rural workers probably rise.
why would real wages rise? are you assuming an aggregate Cobb-Douglas
production function?
Freer trade in African agricultural commodities may encourage
over-specialization in these, which threatens to make the African countries
even more dependent on cash-crop exports to pay for food imports. Thus, a
foreign exchange crisis can cause starvation. (The cash crop fails, cutting
off the supply of dollars to buy food.) Further promotion of exports also
encourages commercialization of agriculture, which expels people from the
land. This encourages migration to the cities and the development of a
permanent migrant-worker underclass. However, those agricultural workers
who can get permanent jobs might see rising income.
The flow of people to the cities would undermine wages in the city, except
for those workers able to insulate themselves from competition. The rise in
the urban reserve army, in fact, would encourage urban workers to engage in
such insulation.
Jim Devine [EMAIL PROTECTED] & http://liberalarts.lmu.edu/~jdevine
