Human labor input is considered the essential core in arising and increasing gross national product, so the equilibrium between supply and demand for labor, is one of the pivots of Egyptian strategy, the overcoming unemployment is the challenging for economic reform in Egypt, by creation productive true employment in all fields. There are many problems hinder motivation the economic development, so the main research problem of the study, can be summarized in the effectiveness of economic reform policies, in the shade of fiscal and monetary policies tools that affect the equilibrium of the structure of labor market. The objective of the study is to explore the effect and role of the economic variables on the behavior and equilibrium of the economic sectors relations through the general equilibrium model. To achieve the objective of the study, the dynamic Liverpool model, that is considered one of the general equilibrium models was estimated, by simultaneous equations system, according to Jerry Hausman method of non linear full information maximum likelihood (NL-FIML). The Liverpool model consists of 28 behavioral equations, and 9 identitiy equations, and included 34 endogenous variables, 28 lagged endogenous variables, and 16 exogenous variables. The study detected and remedied the econometric problems, i.e., autocorrelation, heteroscedasticity, non normality of the random error term, and multicollinearity among independents variables, by using Beach-Mackinnon, White’s generalized method of moments, Box-Tidwell, and Marquardt ridge algorithms, for the previous problems respectively. The study used time series data for analysis Liverpool model, that collected from different sources to cover the period (1980-2002), with respect to agriculture, commodities, and services sectors in Egypt. The results of Liverpool model were consistent with the economic theory, it is noticed that the agricultural sector came in the first order according to the effect of the demand for labor in increasing the agricultural domestic product, also the agricultural national product affects increasing the demand for labor, but the agricultural investment didn’t affect, also, there was substitution between technology and the demand for labor. On the other hand, the results showed the effectiveness of the fiscal policy and ineffectiveness of the monetary policy as a result of the inelastic investment with respect to interest rate in all sectors, also increasing taxes led to decreasing the consumption, as an indicator of the effectiveness of fiscal policy. The demand for money with respect to interest rate was inelastic, as an indicator of the effectiveness of monetary policy. Finally, the study recommended applying expanded monetary policy by encouragement investment, especially in the intensive labor projects, also applying expanded fiscal policy by reducing taxation and increasing government expenditure for increasing production, consumption, and employment rates, moreover, the joint among economic plans, education, and training for achieving the equilibrium labor market, and decreasing the quantitative and qualitative unemployment rates in the Egyptian sectors.
