De Hoyos, Rafael E.Bussolo, MaurizioMedvedev, Denis2012-03-192012-03-192011-10-01https://hdl.handle.net/10986/3615This paper uses a dynamic macro-micro framework to evaluate the potential distributional effects of the expansion of the Panama Canal. The results show that large macroeconomic effects are only likely during the operations phase (2014 and onward), and income gains are likely to be concentrated at the top of the income distribution. The additional foreign exchange inflows during the construction and operations phases result in the loss of competitiveness of non-Canal sectors (Dutch disease) and in higher domestic prices, which hurt the poorest consumers. In addition, the construction and operation activities increase demand for more educated non-farm formal workers. Although these changes encourage additional labor movement out of agriculture and from the informal to the formal sector, much of the impact is manifested in growing wage disparities and widening income inequality. Using the additional revenues of the Canal expansion in a targeted cash transfer program such as "Red de Oportunidades", the Government of Panama could offset the adverse distributional effects and eradicate extreme poverty.CC BY 3.0 IGOACCOUNTINGAGRICULTUREAVERAGE WAGEAVERAGE WAGESBASE YEARBORROWINGCAPITAL ACCUMULATIONCAPITAL MARKETSCAPITAL RETURNSCAPITAL STOCKCDCOMMERCECOMMODITIESCOMMODITYCOMPETITIVE LABOR MARKETSCOMPETITIVENESSCONSTANT RETURNS TO SCALECONSUMER GOODSCONSUMER PRICECONSUMER PRICE INDEXCONSUMER PRICESCONSUMERSCORPORATE TAXCURRENT ACCOUNT BALANCEDEBTDEMAND CURVEDEVELOPMENT POLICYDISPOSABLE INCOMEDISTRIBUTION OF INCOMEDISTRIBUTION OF INCOMESDIVIDENDSDOMESTIC MARKETDOMESTIC PRICESDUAL ECONOMYEARNINGECONOMIC BOOMECONOMIC STRUCTUREECONOMICSEDUCATIONAL ATTAINMENTEDUCATIONAL SERVICESELASTICITYELASTICITY OF SUBSTITUTIONEMPLOYMENT EFFECTEMPLOYMENT EFFECTSEMPLOYMENT MULTIPLIEREMPLOYMENT STATUSENDOGENOUS VARIABLESEQUILIBRIUMESTIMATED PARAMETEREXCHANGE RATEEXOGENOUS VARIABLESEXPECTED VALUEEXPECTED WAGEEXPENDITUREEXPORT MARKETSEXPORT SECTORSEXPORTSEXTERNAL COMPETITIVENESSEXTREME POVERTYFACTOR MARKETSFACTOR PRICEFACTOR PRICESFINANCIAL MARKETSFINANCIAL SERVICESFOOD PRICESFORECASTSFOREIGN CURRENCYFOREIGN EXCHANGEFOREIGN FIRMSFORMAL SECTOR WAGESFORMAL SECTOR WORKERSFULL EMPLOYMENTFUTURE RESEARCHGDP DEFLATORGDP PER CAPITAGENERAL EQUILIBRIUMGINI COEFFICIENTGOVERNMENT BUDGETGOVERNMENT EXPENDITURESGROWTH RATEGROWTH RATESHOUSEHOLD CHARACTERISTICSHOUSEHOLD CONSUMPTIONHOUSEHOLD INCOMEHOUSEHOLD SURVEYHOUSEHOLD SURVEYSINCOMEINCOME DISTRIBUTIONINCOME EFFECTINCOME INEQUALITYINCOME TAXINFORMAL SECTORINFRASTRUCTURE DEVELOPMENTINFRASTRUCTURE PROJECTINFRASTRUCTURE PROJECTSINTERMEDIATE GOODSINTERNATIONAL CAPITALINTERNATIONAL CAPITAL MARKETSINTERNATIONAL MIGRATIONINTERNATIONAL TRADEJOB CREATIONJOBSLABOR ALLOCATIONLABOR COSTSLABOR DEMANDLABOR FORCELABOR MARKETLABOR MARKET SEGMENTATIONLABOR MARKETSLABOR MOBILITYLABOR MOVEMENTLABOR PRODUCTIVITYLABOR PRODUCTIVITY GROWTHLABOR REALLOCATIONLABOR SUPPLYLABOURLIVING STANDARDSMACROECONOMIC EFFECTSMACROECONOMIC POLICIESMARGINAL PROPENSITY TO SAVEMARKET PRICEMARKET PRICESMARKET SEGMENTMARKET SEGMENTSMARKET SUPPLYMINIMUM WAGEMONOPOLYMULTIPLIER EFFECTMULTIPLIER EFFECTSNATURAL RESOURCENET EMPLOYMENTOCCUPATIONSPENSIONSPER CAPITA INCOMEPER CAPITA INCOMESPERFECT COMPETITIONPOVERTY ALLEVIATIONPREVIOUS SECTIONPRICE CHANGESPRICE ELASTICITYPRICE ELASTICITY OF DEMANDPRICE INFLATIONPRIMARY SOURCEPRIVATE INVESTMENTPRODUCER PRICEPRODUCTION OUTPUTPRODUCTIVITYPRODUCTIVITY EFFECTSPRODUCTIVITY GROWTHPUBLIC SERVICEPUBLIC SERVICESRAPID GROWTHRATE OF GROWTHRATE OF RETURNRATE OF RETURN TO CAPITALREAL GDPREAL INCOMEREAL WAGESRENTSRISK AVERSIONRISK-AVERSE INDIVIDUALSRURAL INFRASTRUCTURERURAL LABORRURAL POVERTYSALESSAVINGSSERVICE SECTORSSKILL PREMIUMSKILLED WAGE PREMIUMSKILLED WORKERSSMALL COUNTRYSPREADSUBSTITUTETAXTAX RATETAX RATESTAX REVENUESTAXATIONTECHNOLOGICAL CHANGETOTAL EMPLOYMENTTOTAL FACTOR PRODUCTIVITYTOTAL OUTPUTUNEMPLOYEDUNEMPLOYED WORKERSUNEMPLOYMENTUNEMPLOYMENT RATEUNSKILLED LABORUNSKILLED WORKERSURBANIZATIONUTILITY FUNCTIONVALUE ADDEDWAGE DIFFERENTIALSWAGE EFFECTSWAGE GAPWAGE GROWTHWAGE LEVELSWAGE RATEWAGE SUBSIDYWAGESWORKERWORLD TRADEWORLD TRADE ORGANIZATIONWorld Bank10.1596/1813-9450-5848