تاثیرات بازار کار مناطق زراعی صادرات در حضور بیکاری  Labor market effects of export processing zones in the presence of unemployment

1. Introduction The creation of Export Processing Zones (EPZs) has become an integral part of the globalization and integration of world trade. Its impact on the growth of exports and efficient utilization of global supply of goods and services has varied by countries. Discussions have also taken place about the economic and political resistance against it. One common element in these debates and discussions is that EPZs have been created mostly in the transitional economies and newly industrialized countries. These countries usually suffer from severe unemployment and one of the most important objectives that has been cited for creating EPZs is to increase employment. Interestingly however, theoretical underpinning of the rationale behind the offshore trading or EPZs (also known as the enclave sector) so far has been done using the assumption of full employment (Brown et al., 2007; Lipsey, 2002; Arndt, 1999). The work that deserves a special attention in this regard is that of Jones and Marjit (1995, henceforth referred as J & M) who have picked a theoretical point that hasn’t found its place in the literature before but that has been a stylized fact of many EPZs all over the world. The point in their analysis is that the foreign element in the new technology brought in by the foreign firms activates certain hidden traits of the domestic labor force. With that notion they have described and modelled the labor market effects of foreign investment in an enclave sector of an underdeveloped economy, however, with the assumption of full employment. It reminds us that the factor that attracts foreign firms, namely the availability of cheap labor is more likely with unemployment. The analysis in the current paper borrows the core model of J & M to show that foreign firms would have much more favorable effect on employment, wage structure, skill composition and wage gaps of the host country when it faces unemployment compared to full employment in that country. This incorporation of unemployment is the difference between the core model of J & M and the model used for this paper where labor market effects cover more facets than described by J & M. The presence of unemployment actually brings out the efficacy of their model used in describing the real world situations (see also Gaston and Gulasekaran, 2013).