Scandinavian Working Papers in Economics

Working Papers,
Copenhagen Business School, Department of Economics

No 03-1999: ON THE EFFECTS OF REDUCING THE GOVERNMENT`S ROLE IN THE LABOUR MARKET: A STYLIZED MODEL FOR EGYPT WITH SOME NUMERICAL POLICY EXAMPLES

Ole Risager and Chang-Po Yang
Additional contact information
Ole Risager: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
Chang-Po Yang: The World Bank, Postal: The World Bank, World Trade Center, 1191 Corniche El Nil, 15th floor, Cairo 11221

Abstract: This paper analyzes the consequences of pursuing a less activist Government employment stabilization policy strategy in Egypt. On the basis of a fairly stylized model we find that a reduction of the Government’s involvement in the economy along with an introduction of mild but binding firing regulations in the private sector may lead to a rise in total employment and to an improvement in Egypt’s trade balance vis-à-vis the rest of the world.

Keywords: Uncertain environment; Job security; Countercyclical government intervention with lifetime employment guarantees; Wages; Employment; Labour market; Egypt

JEL-codes: J40

20 pages, February 1, 1999

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