Trade Protectionand Employment in Manufacturing: the Case of Malaysia

The primary focus of the study is on employment responses to trade policy in the 1990s. Although tariffs and export duties in manufacturing were substantially reduced, quantitative restrictions were scaled up in the 1990s. The results suggest that trade liberalisation via the dismantling of trade barriers is desirable given the positive impact on aggregate employment, both skilled and unskilled. Conversely, only unskilled labour showed significant response to the imposition of licensing requirements. The type of licensing mattered as higher import licensing permits reduced unskilled labour demand whilst export licensing had the opposite effect on the latter. Non-tariff barriers rather than tariffs are thus more likely, if any, to have a bearing on skill inequality in manufacturing.