Panel A of table 6 reports the results of the exercise. Columns (1)-(8) report the counterfactual market output relative to the baseline calibrated value as I make exogenous changes in i , i ,2015(h) and i ,2015 . In columns (1)-(6), I make changes in one set of parameters while keeping the cc ,2015(ww) ττ yy yy others fixed at the 2015 levels. For example, columns (1) and (2) corresponds to changes when I replace ττ zz i with i and i respectively. Columns (7) and (8) report the changes when I replace both barriers and preferences jointly. To gauge how large these variations are, I report the relative cc cc cc ,2015(ww) ,1995(ww) ,2005(ww) ττ ττ ττ real GDP per capita in 1995 and 2005 in columns (9) and (10) respectively.

All figures in columns (1) and (2) exceed unity. Hence, changes in labor market discrimination have dragged economic expansion in all the economies. The impact is most pronounced in Panama. Market output increases by 200 and 75 percent when I supplant barriers from 1995 and 2005 respectively. Replacing barriers from 1995 causes output to rise considerably in Costa Rica as well. The counterfactual expansion is expected given the earlier evidence of rising labor market barriers in the two countries (figures 2.1(a) and 2.3(a)). The predicted shift is marginal for El Salvador where the impact from rising discrimination in some occupations is offset by declining barriers in others (figure 2.2(a)).

Columns (3) and (4) report the aggregate effect of changes in human capital barriers. Recall that all the countries were generally successful in reducing these distortions (figure 2, panel (b)). Hence, it is no surprise that the counterfactual output usually diminishes when past barriers replace the present ones. Like in the case of labor market barriers, the channel is quantitatively most influential in Panama. Output contracts by 70-85 percent relative to the present level. Though comparatively much weaker, the channel is quantitatively relevant for Costa Rica too. The aggregate implications for El Salvador are again trivial.

Columns (5) and (6) quantify the impact of the preference channel. The model estimates a net expansionary effect for Panama. Past preferences exert a qualitatively variable influence in Costa Rica. Substituting the preference profile from 1995 indicates a minor economic loss. However, market output expands when I use preferences from a decade ago. Preferences in El Salvador have evolved somewhat peculiarly over the years. Relative to past decades, both women and men find it preferable to work in the home-sector compared to the market occupations (figures 4.2(a) and 4.2(b)). In line with this, I find that the output in 2015 will increase by 7.5 and 3.5 percent if the preferences of the young workers are replaced with the preferences of the old and middle cohorts respectively. Interestingly, the channel is the strongest among the three considered.

Finally, columns (7) and (8) report relative output associated with the collective effect of the three channels. In Costa Rica and Panama, human capital and preference channels are strong enough to offset the impact of the labor market channel. In El Salvador, the impact of lower human capital barriers relative to 1995 is not enough to compensate for the change exerted by the other two channels. In conclusion, if there were no changes in barriers and preferences over the decades, the market output would be lower in Costa Rica (15-31 percent) and Panama (62-85 percent). In contrast, the output would be marginally higher (4-7 percent) in El Salvador.

Columns (9) and (10) provide perspective on whether these effects are notable compared to actual changes in GDP per capita. GDP per capita is not an exact benchmark for model output. The latter is derived using information from labor surveys. Moreover, the lack of data before 1995 does not allow me to solve the model for any period other than 2015. Even so, the change in real GDP per capita can serve as a first yardstick to assess the strength of the three channels. In general, the three channels –