TRADE LIBERALISATION, TAX REFORM AND UNEMPLOYMENT IN TUNISIA: AN INTERTEMPORAL GENERAL EQUILIBRIUM ANALYSIS

This article analyses the impact of the Euro-Tunisian Free Trade Agreement and of various tax reform scenarios on unemployment in Tunisia. At this aim, we build a multisectoral intertemporal general equilibrium model, taking into account imperfect labour market behaviour. The main conclusion is that the agreement with the EU slightly reduces unemployment in Tunisia. The positive effects are due to a rise in investment induced by lower capital goods prices, capital goods being the bulk of Tunisian imports from the EU. The more the tax reform is investment friendly, the more the dynamic effects of the free trade agreement are significant.