nep-int New Economics Papers
on International Trade
Issue of 2023‒08‒28
twenty papers chosen by
Luca Salvatici, Università degli studi Roma Tre

  1. The potential impact of environmental goods trade liberalization on trade and emissions By Bacchetta, Marc; Bekkers, Eddy; Solleder, Jean-Marc; Tresa, Enxhi
  2. The economic costs of supply chain decoupling By Attinasi, Maria Grazia; Boeckelmann, Lukas; Meunier, Baptiste
  3. Exporting, Global Sourcing, and Multinational Activity: Theory and Evidence from the United States By Pol Antràs; Evgenii Fadeev; Teresa C. Fort; Felix Tintelnot
  4. Backfired Deregulation of Foreign Ownership Restrictions under Fiscal Competition for Foreign Direct Investment By OKOSHI Hirofumi; Kyikyi Thar
  5. 무역과 노동의 연계에 관한 글로벌 규범 현황과 시사점(The Linkage between International Trade and Labour Standards: Current Status and Implications) By Koo, Kyong Hyun
  6. Post COVID-19 Prospects for India-Japan Economic Partnership By Nisha Tameja; Sanjana Joshi; Samridhi Bimal; Shubham Kumar Singh
  7. Digital intensity, trade costs and exports' quality upgrading By Raphaël Chiappini; Cyrielle Gaglio
  8. Measuring Value Added in Gross Trade: Endogenous Approach of Vertical Differentiation By Sourish Dutta
  9. Technological Transfer Channels of Food and Beverage Processing Multinationals to Host Countries: An Empirical Analysis By Rama, Ruth
  10. The Changing Firm and Country Boundaries of US Manufacturers in Global Value Chains By Teresa C. Fort
  11. Why did agriculture’s share of Australian GDP not decline for a century? By Kym Anderson
  12. 경제안보 이슈의 부상과 대외협력 방향(Emergence of Economic Security Issues and External Cooperation Strategy) By Choi, Wonseok; Kwak, Sungil; Moon, Jin-Young; Choi, Jangho; Han, Hyoungmin; Park, Youngseok; Rhee, Jung-Kyun; Kim, Eunmi; Hong, Jin Hee; Kim, Bumhwan; Kim, Jong In; Yoon, Junghyun
  13. India's Electronics Industry: Potential for Domestic Manufacturing and Exports By Neha Gupta; Priya Kumar; Rachit Saini
  14. Why Is the Roy-Borjas Model Unable to Predict International Migrant Selection on Education? Evidence from Urban and Rural Mexico By Stefan Leopold; Jens Ruhose; Simon Wiederhold
  16. Nowcasting world trade with machine learning: a three-step approach By Chinn, Menzie D.; Meunier, Baptiste; Stumpner, Sebastian
  17. International Migrants and Indigenous Residents in the Russian Labor Market: An Empirical Analysis Based on Labor Force Survey Data By Kartseva Marina A. (Карцева Марина); Florinskaya Julia F. (Флоринская Юлия)
  18. A Trilateral Approach: Community-based Europe, Việt Nam, and ASEAN. From Strategic Dilemma to Đổi Mới Apotheosis (1976-1995) By Maxime Ghazarian
  19. Permanent Residency and Refugee Immigrants’ Skill Investment By Jacob Nielsen Arendt; Christian Dustmann; Hyejin Ku
  20. Monopsony, Efficiency, and the Regularization of Undocumented Immigrants By Borjas, George J.; Edo, Anthony

  1. By: Bacchetta, Marc; Bekkers, Eddy; Solleder, Jean-Marc; Tresa, Enxhi
    Abstract: We combine econometric estimation with quantitative modelling to generate projections on the trade, GDP, and emissions effects of a potential trade liberalization agreement in energy related environmental goods (EREGs) and environmentally preferable products (EPPs). Trade liberalization can contribute to reduced emissions in two ways in our projections: (i) a reduction of import prices of goods promoting energy efficiency; (ii) a reduction in the costs of intermediate and capital goods used in the production of electricity from renewable sources. We evaluate four scenarios combining reductions in tariffs and non-tariff measures (NTMs) of EREGs and EPPs. Using simulations with the WTO Global Trade Model findings show (i) an increase in exports of EREGs and EPPs both at the global level and in most regions; (ii) a modest increase in GDP in all regions because of falling tariffs, NTMs, and increased energy efficiency; (iii) a modest reduction in global emissions of about 0.6%. The dominant channel is energy efficiency whereas the costs of EREGs as intermediates in renewable energy production play a minor role, with or without end use control.
    Keywords: Environmental Goods (EGs), Trade Liberalization, Emissions, Energy efficiency
    JEL: F14 F13 F17 F18 Q56
    Date: 2023
  2. By: Attinasi, Maria Grazia; Boeckelmann, Lukas; Meunier, Baptiste
    Abstract: As countries and firms increasingly seek ways to strengthen the resilience of their supply chains, this paper studies the global economic costs of a decoupling of global supply chains along geopolitical lines as well as in strategic sectors. We explore not only the long-run effects, but also the short-run costs stemming from rigid wages and low substitutability across factors of production and input goods. We find that, in terms of welfare losses, the costs of decoupling are roughly five times higher in the short-run compared to the long-run, while country losses are heterogeneous. A reshaping of global supply chains increases the level of consumer prices in most countries, as well as producer prices, especially for trade-intensive manufacturing sectors. Global supply chain decoupling entails also a reallocation of labour across skill levels. Finally, global trade would decrease substantially, driven by lower trade in intermediate inputs and a higher reliance of countries on domestic production. JEL Classification: F12, F13, F14, F51, F62
    Keywords: decoupling, global value chains, international trade, trade modelling
    Date: 2023–08
  3. By: Pol Antràs; Evgenii Fadeev; Teresa C. Fort; Felix Tintelnot
    Abstract: Multinational firms (MNEs) dominate trade flows, yet their global production decisions are often ignored in firm-level studies of exporting and importing. Using newly merged data on US firms' trade and multinational activity by country, we show that MNEs are more likely to trade not only with countries in which they have affiliates, but also with other countries within their affiliates' region. We rationalize these patterns with a new source of firm-level scale economies that arises when country-specific fixed costs to source from, or sell in, a market are shared across all the MNE's plants. These shared fixed costs create interdependencies between a firm's production and trade locations that generate third-market responses to bilateral trade policy changes.
    JEL: F1 F2
    Date: 2023–07
  4. By: OKOSHI Hirofumi; Kyikyi Thar
    Abstract: Parallel to tax/subsidy competition for foreign direct investment (FDI), we have recently observed the relaxation of FDI restrictions, especially in developing countries, and mixed outcomes of inward FDI. This study examines how foreign-ownership regulation affects a multinational enterprise's (MNE's) location choice under fiscal competition. Consistent with the literature, our model shows that the larger country tends to host the MNE without FDI regulation due to the market-size advantage. With FDI regulation, however, irrespective of the market-size gap, the smaller country can attract the MNE under certain circumstances. Interestingly, our result indicates that looser FDI regulation in the larger country can induce the MNE to choose the smaller country as the production location because this reduces the local (potential) partner firm's profits and directs the local firm to decline the joint venture offer.
    Date: 2023–08
    Abstract: 본 연구에서는 FTA 등 양자·복수국 간 무역협정을 통한 무역·노동의 연계, IPEF를 통해 미국이 시도하고 있는 새로운 무역·노동 연계 모델, 국내법 차원의 무역·노동 연계에 관한 글로벌 규범 현황을 살펴본다. 또한 앞으로의 FTA 협상과 IPEF에서의 노동기준, 주요 교역국의 노동·공급망 연계 규제로 인한 대응방향에 관해 정책 시사점을 제시한다. Through the evolution of international trade agreements, the conceptual boundaries of ‘trade’ have expanded beyond the simple movement of goods across national borders to a matter of common economic governance among countries. In particular labor standards have long been a controversial issue in international trade. The linkage between trade and labor standards is expected to emerge as an important trade issue in the future. Internationally recognized labor standards such as those adopted by the International Labor Organization (ILO) have been incorporated into FTAs, and the level of protection of labour rights has been enhanced significantly with respect to both substantive and procedural FTA provisions. Further, there have been a couple of cases where a Party’s failure of FTA labour obligations was referred to judicial review under FTA dispute settlement procedures. This study examines the trade-labour linkage in three main aspects. Firstly, the most traditional approach of linking trade and labour standard has been to improve labour standards in trading partners through bilateral and plurilateral trade agreements including FTAs. This trend is in line with the recent increase in litigation between countries under a FTA dispute settlement procedure. Since 2018, there have been a total of 18 cases where Parties invoked FTA dispute settlement provisions, four of which were labour- or environment-related disputes. It is also worth noting that two out of these four cases were complaints filed against Korea. The main components of FTA labour standards include (ⅰ) incorporation of ILO international labour standards (ⅱ) non-derogation (ⅲ) effective implementation of labour obligations (ⅳ) labour cooperation, and (ⅴ) corporate social responsibility (CSR). More recent FTAs also cover issues such as gender equality, protection of migrant workers' labour rights, and import prohibition on products made by forced labour. With respect to enforceability and dispute settlement, one should pay particular attention to the Facility-Specific Rapid-Response Labor Mechanism or “RRM”, which was introduced by the United States for the first time in USMCA. (the rest omitted)
    Keywords: labor standards. Free Trade Agreement. International Labor Organization. Indo-Pacific Economic Framework. Forced labor; the link between trade and labor; and the current status of global norms
    Date: 2022–12–30
  6. By: Nisha Tameja (Indian Council for Research on International Economic Relations (ICRIER)); Sanjana Joshi (Indian Council for Research on International Economic Relations (ICRIER)); Samridhi Bimal; Shubham Kumar Singh
    Abstract: This study examines the recent trends in India-Japan economic relations covering bilateral trade, investment and ODA; highlights the synergies between Japan's COVID-19 related measures to support its companies to diversify their production sites and supply chains and the reform measures that India is undertaking to facilitate greater integration in regional and global supply chains in the Indo-Pacific region. The paper also underlines policy measures that will enable mutually beneficial economic collaboration between India and Japan to gain traction in post-COVID times.
    Keywords: India-Japan, economic relations, bilateral trade, covid-19, icrier, Foreign Direct Investment, FDI
  7. By: Raphaël Chiappini (BSE - Bordeaux Sciences Economiques - UB - Université de Bordeaux - CNRS - Centre National de la Recherche Scientifique); Cyrielle Gaglio (OFCE - Observatoire français des conjonctures économiques (Sciences Po) - Sciences Po - Sciences Po)
    Abstract: his paper studies the relationships between digitalisation, trade costs, quality upgrading and trade flows, using an extended version of a gravity model. Based on information from various sources of data, we estimate these relationships sequentially for a sample of 18 manufacturing and 14 service sectors in 40 countries over the period 2000–2014. Using input–output tables from World Input–Output Database, we define an original measure of digitalisation at the country-sector level that reflects the use of digital inputs into a country's production function. Using trade databases from the CEPII and OECD, we estimate a series of gravity models of trade augmented with this measure of digitalisation. Our results show that sectoral digital intensity positively affects sectoral exports. We provide evidence that this result is not ruled out by other possible factors, such as internet adoption or participation in a global value chain. A heterogeneous analysis also reveals that the effect of digital intensity is stronger for manufacturing trade and for trade between emerging economies. We explore two possible mechanisms explaining this positive relationship. First, we find that digital intensity facilitates trade between countries by reducing communication and transport costs. Second, we show that digital intensity improves the quality of exported products.
    Keywords: Digital intensity, gravity model, Export upgrading
    Date: 2023–06–21
  8. By: Sourish Dutta
    Abstract: From the beginning of the 1980s, the first theoretical analysis of intra-industry trade showed that the determinants and consequences of this type of trade are different, depending on whether the traded products differ in quality. When the products are subject to intra-industry trade between two countries with distinct qualities, this trade is vertically differentiated. Otherwise, it is called horizontal differentiation. There is a method for distinguishing intra-industry trade between two countries in vertical differentiation from those in horizontal differentiation. This method compares exports' unit value to imports for each industry's intra-industry trade. It considers the intra-industry trading carried out in this industry as vertical differentiation when the unit value of exports differs significantly from that of imports. This approach has limitations. The discussion below will lead us to think about an alternative method for separating and measuring intra-industry trade into horizontal and vertical differentiation.
    Date: 2023–07
  9. By: Rama, Ruth
    Abstract: Purpose. This research examines the possibility of food and beverage (F&B)-processing multinational corporations serving as a viable conduit for the international diffusion of technology. Methodology. This study utilizes existing literature to analyse three potential avenues through which technology transfer occurs from these corporations to host sectors: contract farming, domestic collaboration for innovation, and spillover effects of Foreign Direct Investment (FDI). Findings. In specific instances, these firms might provide support to local innovators through financial assistance or complementary resources. Additionally, they may actively facilitate technology transfers to particular types of local partners and they may generate demonstration effects. Nevertheless, the prevailing evidence consistently indicates that the impact of FDI on the host sector is generally limited or selective. Practical implications. The findings of this study cast doubt on the overly optimistic views held by international organizations and host governments regarding FDI in the food sector as a major source of cutting-edge technology for host countries. The incentives offered to food and beverage multinationals should be carefully calibrated to strike a balance between acknowledging potential benefits to the sector's innovation system and maintaining a realistic perspective on the actual outcomes. Originality. This study combines and analyses three separate empirical lines of research in parallel to offer factual elements for a policy debate. By integrating these different research approaches, the study aims to contribute to a well-informed discussion on relevant policy matters.
    Keywords: Innovation, internationalisation of R&D, FDI policy, food and beverage sector, contract farming, spillovers of knowledge, cooperation for innovation.
    JEL: F6 F63 F69 O3 O33
    Date: 2023–08–01
  10. By: Teresa C. Fort
    Abstract: This paper documents how US firms organize goods production across firm and country boundaries. Most US firms that perform physical transformation tasks in-house using foreign manufacturing plants in 2007 also own US manufacturing plants; moreover manufacturing comprises their main domestic activity. By contrast, “factoryless goods producers” outsource all physical transformation tasks to arm’s-length contractors, focusing their in-house efforts on design and marketing. This distinct firm type is missing from standard analyses of manufacturing, growing in importance, and increasingly reliant on foreign suppliers. Physical transformation “within-the-firm” thus coincides with substantial physical transformation “within-the-country, ” whereas its performance “outside-the-firm” often also implies “outside-the-country.” Despite these differences, factoryless goods producers and firms with foreign and domestic manufacturing plants both employ relatively high shares of US knowledge workers. These patterns call for new models and data to capture the potential for foreign production to support domestic innovation, which US firms leverage around the world.
    Date: 2023–07
  11. By: Kym Anderson
    Abstract: The agricultural sector’s share of GDP in growing economies typically declines but, for a century from the early 1850s, Australia’s did not. Drawing on recent structural transformation literature, this paper seeks explanations for this unusual phenomenon, which is all the more striking because agriculture’s share of employment continued to decline throughout and growth in manufacturing was being stimulated by tariff protection from imports. Several factors contributed, including a huge land frontier that took more than a century for settlers to explore, rapid declines in initially crippling domestic and ocean trade costs for farm products, the absence of a need to do any processing of the two main exports during that period (gold and wool), and innovations by farmers and via a strong public agricultural R&D system that contributed to farm labour productivity nearly doubling over those ten decades. The ban on iron ore exports from 1938 and low export prices for fuels, minerals and metals during the two world wars and in the intervening decades also contributed.
    Keywords: agricultural development, farm productivity growth, trade costs, mining booms, manufacturing protection
    JEL: F13 F63 N47 O13 Q17
    Date: 2023
    Abstract: 본 보고서에서는 공급망·기술·에너지·식량 등 주요 분야뿐만 아니라 우주와 북한 체제의 안정성 악화에 의한 한국 경제의 하방 리스크 등 다양한 경제안보 이슈를 소개하고 이에 관한 대응 및 협력 방향을 모색하였다. As geopolitical conflicts escalate, such as the US-China conflict and the Russia-Ukraine war, friction arises in various fields such as supply chain, technology, and energy. These frictions can pose a threat to the economic growth and security of a country, so the fields that need to be analyzed from the perspective of economic security are gradually expanding. Therefore, this report introduces various economic security issues in major sectors such as supply chain, technology, energy, and food. It also examines the downside risks to the Korean economy due to the deterioration of stability in the North Korean regime and space. Finally, it suggests ways to respond and cooperate. Chapter 2 examines economic security issues and cooperation directions in the supply chain sector by analyzing GVC (Global Value Chain) and major countries’ policies for managing supply chain risks. Some of the major economic security issues in the supply chain are △the reorganization of supply chains due to the pandemic and geopolitical conflicts △the deterioration of the domestic industrial base due to increased dependence on the US and China for supply chains △the increased importance of emerging countries such as India, Mexico and Vietnam in the global supply chain. The main findings of the GVC analysis by 2021 show that the roles of the US and China in the global supply chain of major countries are continuously increasing, and that emerging countries such as India, Mexico, Vietnam and Brazil have become more important in the global supply chain. Moreover, as a result of reviewing the supply chain policies of major countries, it was found that they commonly pursued legislation to foster high value-added industries and support investment in core minerals. Therefore, Korea needs to strengthen bilateral consultations with the US and China through regular agreements, while enhancing supply chain connectivity with emerging countries whose importance in the supply chain is gradually increasing. In particular, it is necessary to actively participate in the formation of supply chain solidarity through multilateral/bilateral cooperation in order to prevent the fragmentation of the supply chain due to disputes between the US and China and geopolitical conflicts.(the rest omitted)
    Keywords: Economic Security; Economic Cooperation; Economic Security; Energy Security; Food Security; Digital Security; Supply Chain Security; Technology Sovereignty
    Date: 2022–12–30
  13. By: Neha Gupta (Indian Council for Research on International Economic Relations (ICRIER)); Priya Kumar (Indian Council for Research on International Economic Relations (ICRIER)); Rachit Saini
    Abstract: This study examines the effectiveness of India's current policies and programs to achieve the goal of "Make in India for the World, " with emphasis on the electronics manufacturing industry. It analyzes three specific questions: (i) the efficacy of current measures in raising production and exports of electronics manufacturing; (ii) in light of the ongoing geo-political tensions, can India build a competitive electronics manufacturing industry while at the same time trying to decouple its economy from China? and (iii) ways the current policy environment can be fine-tuned to achieve the stated goal. A key part of this exercise has been to gauge the electronics’ manufacturing ecosystem in India, which involved wide ranging consultations with key government departments including MeitY, NITI Aayog, Electronics Sector Skills Council of India, as well as with the important private sector players. The field-based surveys have been complemented with detail analysis of data, including HS (Harmonised System) production classification using India’s tariff lines (8-digit codes), from the Export-Import Data Bank of Department of Commerce, Government of India.
    Keywords: indian electronics, export, import, electronics policies, icrier
    Date: 2021–08
  14. By: Stefan Leopold; Jens Ruhose; Simon Wiederhold
    Abstract: The Roy-Borjas model predicts that international migrants are less educated than nonmigrants because the returns to education are generally higher in developing (migrant-sending) than in developed (migrant-receiving) countries. However, empirical evidence often shows the opposite. Using the case of Mexico-U.S. migration, we show that this inconsistency between predictions and empirical evidence can be resolved when the human capital of migrants is assessed using a two-dimensional measure of occupational skills rather than by educational attainment. Thus, focusing on a single skill dimension when investigating migrant selection can lead to misleading conclusions about the underlying economic incentives and behavioural models of migration.
    Keywords: international migration, selection, occupational skills, education
    JEL: F22 O15 J61 J24
    Date: 2023
  15. By: Gilles Pache (CERGAM - Centre d'Études et de Recherche en Gestion d'Aix-Marseille - AMU - Aix Marseille Université - UTLN - Université de Toulon)
    Abstract: The war in Ukraine is a major geopolitical crisis whose first economic repercussions, particularly in terms of inflation, were quickly felt in Europe. Looking further ahead, the resulting disruption in supply systems could give rise to new models of industrial organization. Will the Ukrainian crisis lead to a ‘regionalization' of global value chains?
    Keywords: Logistics, Regionalization, Supply systems
    Date: 2023–01
  16. By: Chinn, Menzie D.; Meunier, Baptiste; Stumpner, Sebastian
    Abstract: We nowcast world trade using machine learning, distinguishing between tree-based methods (random forest, gradient boosting) and their regression-based counterparts (macroeconomic random forest, linear gradient boosting). While much less used in the literature, the latter are found to outperform not only the tree-based techniques, but also more “traditional” linear and non-linear techniques (OLS, Markov-switching, quantile regression). They do so significantly and consistently across different horizons and real-time datasets. To further improve performances when forecasting with machine learning, we propose a flexible three-step approach composed of (step 1) pre-selection, (step 2) factor extraction and (step 3) machine learning regression. We find that both pre-selection and factor extraction significantly improve the accuracy of machine-learning-based predictions. This three-step approach also outperforms workhorse benchmarks, such as a PCA-OLS model, an elastic net, or a dynamic factor model. Finally, on top of high accuracy, the approach is flexible and can be extended seamlessly beyond world trade. JEL Classification: C53, C55, E37
    Keywords: big data, factor model, forecasting, large dataset, pre-selection
    Date: 2023–08
  17. By: Kartseva Marina A. (Карцева Марина) (The Russian Presidential Academy of National Economy and Public Administration); Florinskaya Julia F. (Флоринская Юлия) (The Russian Presidential Academy of National Economy and Public Administration)
    Abstract: Millions of international migrants are living in Russia today. This paper, based on Rosstat’s “Selective Observation of Migrant Labor” survey conducted in 2019, provides an econometric comparative analysis of the labor market situation for migrants arriving to Russia since 1992 vs. the local population. The migrants’ situation is compared by multiple indicators, depending on the duration of their residence in Russia – less than one year; one to five years; 5 years or more. It is demonstrated that the migration has no statistically significant effect on the availability of paid employment. At the same time, the sectoral structure of employment, as well as the structure of employment in terms of occupational groups, show significant differences depending on the period of migrants’ stay in Russia. Recent migrants, living in Russia for less than 5 years, are significantly more likely to work in construction and trade, and much less likely to go into healthcare, education, or public administration, compared to those who have been living in Russia for more than 5 years. At the same time, old-timer migrants are much more likely to be middle or top-level specialists, or to hold managerial positions. The most notable differences between the situations of recent and old-timer migrants, as well as the locals, can be observed in labor relations between the employee and the employer. All other things being equal, recent migrants are significantly more likely to have no formal employment contract, as opposed to old-timer migrants or the locals. The longer the migrants stay in Russia, the more they adapt to the Russian labor market, and with a sufficiently long period of residence, the labor market shows almost no difference between the situations of migrants and the locals.
    Keywords: migrants, labor market, employment structure, duration of stay
    JEL: J61 R23
    Date: 2022–10
  18. By: Maxime Ghazarian (CRISES - Centre de Recherches Interdisciplinaires en Sciences humaines et Sociales de Montpellier - UPVM - Université Paul-Valéry - Montpellier 3)
    Abstract: Based on French archives of the Ministry of European and Foreign Affairs and European historical archives, this study focuses on links between community-based Europe, Việt Nam, and ASEAN. Việt Nam had a key role in the EU and ASEAN communitarization, from creating mechanisms to reinforcing approaches to political cohesion to face Việt Nam's issues (migration management, Cambodian conflict, Việt Nam's opening). In these processes, beyond European Economic Community support of ASEAN diplomatic engagements, many dissensions were observed inside the community-based organs. The EEC had to preserve its particular status in South East Asia, deepen relations with ASEAN, and maintain dialogue with Việt Nam while condemning Vietnamese regional policy and ensuring its development assistance diplomacy. For ASEAN, the challenge was to pursue its opening toward Europe, develop interregional economic relations, and claim itself as a leader to resolve the regional doldrums. Between these two regional organizations, Việt Nam tried to adopt a complex strategy: to sanctuarize its national security and also to keep extremely limited room for maneuver with both ASEAN and the EEC. Việt Nam attempted on the one hand to maintain a bilateral dialogue or through international organizations with ASEAN member states, and in another hand, to request European aid as an ultimate exchange channel. The diplomatic game of Go ended thanks to Đổi Mới. This paradigm shift opened a new era where several ASEAN and EU member states allowed Việt Nam to be reintegrated into international relations. The diplomatic effervescence created new opportunities for Hà Nội which tended to increase profoundly its relations with the EU and to integrate ASEAN.
    Keywords: ASEAN, European Economic Community EEC, European Union, Doi Moi, Inter-regionalism, Diplomacy, Đổi Mới
    Date: 2022–12–19
  19. By: Jacob Nielsen Arendt; Christian Dustmann; Hyejin Ku
    Abstract: We analyze an immigration reform in Denmark that tightened refugee immigrants’ eligibility criteria for permanent residency to incentivize their labor market attachment and acquisition of local language skills. Contrary to what the reform intended, the overall employment of those affected decreased while their average language proficiency remained largely unchanged. This was caused by a disincentive effect, where individuals with low pre-reform labor market performance reduced their labor supply. Our findings suggest that stricter permanent residency rules, rather than incentivizing refugees’ skill investment, may decrease the efforts of those who believe they cannot meet the new requirements.
    Keywords: immigrant assimilation, refugee integration, labor supply, language proficiency, human capital
    JEL: J22 J24 J61
    Date: 2023
  20. By: Borjas, George J. (Harvard University); Edo, Anthony (CEPII, Paris)
    Abstract: In May 1981, President François Mitterrand regularized the status of undocumented immigrant workers in France. The newly legalized immigrants represented 12 percent of the non-French workforce and about 1 percent of all workers. Employers have monopsony power over undocumented workers because the undocumented may find it costly to participate in the open labor market and have restricted economic opportunities. By alleviating this labor market imperfection, a regularization program can move the market closer to the efficient competitive equilibrium and potentially increase employment and wages for both the newly legalized and the authorized workforce. Our empirical analysis reveals that the Mitterrand regularization program particularly increased employment and wages for low-skill native and immigrant men, and raised French GDP by over 1 percent.
    Keywords: monopsony, regularization, undocumented immigrants, labor market
    JEL: D43 J31 J42 J61
    Date: 2023–07

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