Impact of Global Economic Crisis on the Employment and Migrant ...

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4. ANALYTICAL MODELThis section aims to briefly demonstrate the important equations <strong>of</strong> general equilibrium appliedin this study. To measure the effect <strong>of</strong> economic crisis, all proxies <strong>of</strong> economic crisis areapplied in the CGE models including trade, technology <strong>of</strong> production, factors <strong>of</strong> production,domestic labor conditions, and the institutional effect. The Constant Elasticity <strong>of</strong> Substitution(CES) function performs the behavior <strong>of</strong> allocation between high and low skilled workers aswell as other group <strong>of</strong> labours.The general equilibrium is applied in this study since it simultaneously determines production,consumption, prices and international trade for all goods and services in the economy. Thelinkages in the economy are shown in the Figure 4.1. However, this method requires thefollowing assumptions.Each economic agents act rationally, such as the consumer maximize utility from consumption,firms maximizes their pr<strong>of</strong>it. Perfect competition prevails in each domestic industry in eachcountry. Consumers and producers’ decision based in the real prices not the nominal prices.Community preferences in consumption can be represented by a consistent set <strong>of</strong> communityindifference curves. The illegal immigration is treated as the low skilled workers because most<strong>of</strong> them are elementary workers. The good market is competitive. The labor market behavemonopsonistic especially, the low skilled market. The formal low-skilled worker is limited at thelower bound by the minimum wage.
Figure 4.1 Framework <strong>of</strong> the Model:Linkage <strong>of</strong> the economyPublic/ high, low skilledworker (formal)Private/ high skilledworker (formal/informal)Private/ Low-skilledworker (formal/informal)Migration (High and Low)LabourCapitalLandValue-addedFactor MarketFactor Income(W,rent)HouseholdsSuppliers(Activities)IntermediateInputsSalesImportsGoods Market(Commodities)ExportsFinalgoodsTransfersEnterprisesGovernmentTaxesSavingsRest <strong>of</strong> the WorldCapitalInvestmentIndirect taxesImport tariffTo capture the impact <strong>of</strong> the economic crisis on each type <strong>of</strong> labour, the sectors <strong>of</strong> productionare classified into 3 types. Those 3 sectors are (1) slow technological development(represented by the agricultural sector), (2) high technological development (represented bythe industry or manufacturing sector) and (3) medium technological development (representedby the other sectors). 44 According to the net flow <strong>of</strong> foreign direct investment classified by sector in 1970 – 2009, the proportion <strong>of</strong>industry sector (Food & sugar, Textiles, Metal & non metallic, Electrical appliances, Machinery & transportequipment, Chemicals, Petroleum products, Construction materials, Others), construction, and mining &quarrying takes about 53 percentages <strong>of</strong> the total net flow <strong>of</strong> FDI. The service sector accounts for 41 percentages,while the agricultural sector includes only 0.2 percentage <strong>of</strong> the FDI. Moreover, the trade to GDP proportion(import and export/ GDP) <strong>of</strong> agricultural, service and agriculture are 63 – 121%, 15-22%, and 7- 10%accordingly. This can be criteria to segregate into 3 sectors.
Page 3 and 4: Employment to population ratio, 15+
Page 5 and 6: into formal employment. This is sup
Page 7 and 8: workers. To capture all above affec
Page 9 and 10: The following section defines the i
Page 11: job seekers with high education pre
Page 15 and 16: political conflict and economic sta
Page 17 and 18: The informal workers who work infor
Page 19 and 20: (2) Low skillThe migrants compose <
Page 21 and 22: Note: * There are some foreign work
Page 23 and 24: Subject toGivenMiDDiDDiTCiP MiP Y(4
Page 25 and 26: 4.4 Labour marketLabour is measured
Page 27 and 28: PP1L0LP1INDEXP0INDEXUNE1 11 phillip
Page 29 and 30: However, the migrant worker within

Impact of Global Economic Crisis on the Employment and Migrant ...

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