Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa
In response to rising inequality following decades of trade liberalization, many countries are adopting trade restrictions. Can temporary trade restrictions have long-lasting effects on the spatial distribution of employment and resource allocation...
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| Format: | Working Paper |
| Language: | English |
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World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/932731565100891105/Temporary-Trade-Shocks-Spatial-Reallocation-and-Persistence-in-Developing-Countries-Evidence-from-a-Natural-Experiment-in-West-Africa http://hdl.handle.net/10986/32214 |
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okr-10986-322142022-09-05T00:24:29Z Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa Emran, M. Shahe Shilpi, Forhad Coulombe, Harold Blankespoor, Brian TEMPORARY TRADE BARRIERS TRADE RESTRICTIONS REGIONAL DEVELOPMENT SKILL AGGLOMERATION ELECTRICITY NIGHT LIGHTS PATH DEPENDENCE EMPLOYMENT TRADE POLICY SPATIAL ECONOMICS GENERAL EQUILIBRIUM MODEL In response to rising inequality following decades of trade liberalization, many countries are adopting trade restrictions. Can temporary trade restrictions have long-lasting effects on the spatial distribution of employment and resource allocation? To analyze this, this paper exploits the civil war in Côte d'Ivoire (2002-07), which disrupted access to the world market for two neighboring landlocked countries: Mali and Burkina Faso. The Ivorian war forced rerouting of trade from the Abidjan route to non-Abidjan routes. This paper builds a general equilibrium model where a subsistence-based autarkic hinterland coexists with an integrated segment, and there are two alternative routes to international markets. A trade shock to one route affects resource allocation in both routes by shifting the spatial margins of market integration and sectoral specialization. The effects are heterogeneous, depending on the pre-war market access of a location. The empirical analysis takes advantage of panel data and estimates the effects on structural change in employment on the non-Abidjan route using a triple difference design with location fixed effects. The areas that remain in autarkic equilibrium before and after the trade shock provide plausible estimates of the changes arising from long-term factors unrelated to the trade shock. The estimates show that the temporary trade shock created divergence between the Abidjan and non-Abidjan routes, with accelerated structural change in favor of manufacturing and services employment in the non-Abidjan route. This paper finds evidence of persistence in the effects through higher sunk investment in built-up density, agglomeration through concentration of skilled labor and greater public investment in complementary inputs such as electricity infrastructure (measured by nightlights density). 2019-08-07T21:24:57Z 2019-08-07T21:24:57Z 2019-08 Working Paper http://documents.worldbank.org/curated/en/932731565100891105/Temporary-Trade-Shocks-Spatial-Reallocation-and-Persistence-in-Developing-Countries-Evidence-from-a-Natural-Experiment-in-West-Africa http://hdl.handle.net/10986/32214 English Policy Research Working Paper;No. 8962 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo World Bank World Bank, Washington, DC Publications & Research Publications & Research :: Policy Research Working Paper Africa Burkina Faso Cote d'Ivoire Mali |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
TEMPORARY TRADE BARRIERS TRADE RESTRICTIONS REGIONAL DEVELOPMENT SKILL AGGLOMERATION ELECTRICITY NIGHT LIGHTS PATH DEPENDENCE EMPLOYMENT TRADE POLICY SPATIAL ECONOMICS GENERAL EQUILIBRIUM MODEL |
| spellingShingle |
TEMPORARY TRADE BARRIERS TRADE RESTRICTIONS REGIONAL DEVELOPMENT SKILL AGGLOMERATION ELECTRICITY NIGHT LIGHTS PATH DEPENDENCE EMPLOYMENT TRADE POLICY SPATIAL ECONOMICS GENERAL EQUILIBRIUM MODEL Emran, M. Shahe Shilpi, Forhad Coulombe, Harold Blankespoor, Brian Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa |
| geographic_facet |
Africa Burkina Faso Cote d'Ivoire Mali |
| relation |
Policy Research Working Paper;No. 8962 |
| description |
In response to rising inequality
following decades of trade liberalization, many countries
are adopting trade restrictions. Can temporary trade
restrictions have long-lasting effects on the spatial
distribution of employment and resource allocation? To
analyze this, this paper exploits the civil war in Côte
d'Ivoire (2002-07), which disrupted access to the world
market for two neighboring landlocked countries: Mali and
Burkina Faso. The Ivorian war forced rerouting of trade from
the Abidjan route to non-Abidjan routes. This paper builds a
general equilibrium model where a subsistence-based autarkic
hinterland coexists with an integrated segment, and there
are two alternative routes to international markets. A trade
shock to one route affects resource allocation in both
routes by shifting the spatial margins of market integration
and sectoral specialization. The effects are heterogeneous,
depending on the pre-war market access of a location. The
empirical analysis takes advantage of panel data and
estimates the effects on structural change in employment on
the non-Abidjan route using a triple difference design with
location fixed effects. The areas that remain in autarkic
equilibrium before and after the trade shock provide
plausible estimates of the changes arising from long-term
factors unrelated to the trade shock. The estimates show
that the temporary trade shock created divergence between
the Abidjan and non-Abidjan routes, with accelerated
structural change in favor of manufacturing and services
employment in the non-Abidjan route. This paper finds
evidence of persistence in the effects through higher sunk
investment in built-up density, agglomeration through
concentration of skilled labor and greater public investment
in complementary inputs such as electricity infrastructure
(measured by nightlights density). |
| format |
Working Paper |
| author |
Emran, M. Shahe Shilpi, Forhad Coulombe, Harold Blankespoor, Brian |
| author_facet |
Emran, M. Shahe Shilpi, Forhad Coulombe, Harold Blankespoor, Brian |
| author_sort |
Emran, M. Shahe |
| title |
Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa |
| title_short |
Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa |
| title_full |
Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa |
| title_fullStr |
Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa |
| title_full_unstemmed |
Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa |
| title_sort |
temporary trade shocks, spatial reallocation, and persistence in developing countries : evidence from a natural experiment in west africa |
| publisher |
World Bank, Washington, DC |
| publishDate |
2019 |
| url |
http://documents.worldbank.org/curated/en/932731565100891105/Temporary-Trade-Shocks-Spatial-Reallocation-and-Persistence-in-Developing-Countries-Evidence-from-a-Natural-Experiment-in-West-Africa http://hdl.handle.net/10986/32214 |
| _version_ |
1764476047530655744 |