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Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries : Evidence from a Natural Experiment in West Africa / M. Shahe Emran.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Emran, M. Shahe.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Armed Conflict.
- Conflict and Development.
- Electricity.
- Employment.
- General Equilibrium Model.
- International Economics and Trade.
- Night Lights.
- Path Dependence.
- Regional Development.
- Skill Agglomeration.
- Spatial Economics.
- Temporary Trade Barriers.
- Trade and Regional Integration.
- Trade and Transport.
- Trade Policy.
- Trade Restrictions.
- Transport.
- Transport and Trade Logistics.
- Local Subjects:
- Armed Conflict.
- Conflict and Development.
- Electricity.
- Employment.
- General Equilibrium Model.
- International Economics and Trade.
- Night Lights.
- Path Dependence.
- Regional Development.
- Skill Agglomeration.
- Spatial Economics.
- Temporary Trade Barriers.
- Trade and Regional Integration.
- Trade and Transport.
- Trade Policy.
- Trade Restrictions.
- Transport.
- Transport and Trade Logistics.
- Physical Description:
- 1 online resource (52 pages)
- Other Title:
- Temporary Trade Shocks, Spatial Reallocation, and Persistence in Developing Countries
- Place of Publication:
- Washington, D.C. : The World Bank, 2019.
- System Details:
- data file
- Summary:
- 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 Cote 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).
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