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Modelling trade policy scenarios: Macroeconomic and trade effects of restrictions in cross border labour mobility

Author

Listed:
  • Donal Smith
  • Przemyslaw Kowalski
  • Frank van Tongeren

Abstract

COVID-19 has drawn renewed attention to the economic importance of cross border mobility. Frictions in cross border mobility of labour can substantially impact the economy and international trade, by causing a long-term decrease in net migration that would alter the labour supply in many economies. To capture these macro-economic and trade effects, a global macroeconomic model (NiGEM) and a general equilibrium trade model (METRO) were used to simulate a stylised scenario equivalent to a 20% reduction in net-migration accumulated over the past ten years for all economies and regions. In OECD countries, this would translate into a reduction of the overall labour supply, and this shock would shift some economic activity towards non-OECD countries. At the sectoral level, exports of labour intensive manufacturing activities in OECD countries would contract, with electronics (13% of the total reduction of exports in the long term), automobiles (12%) and pharmaceuticals (9%) among the most affected.

Suggested Citation

  • Donal Smith & Przemyslaw Kowalski & Frank van Tongeren, 2022. "Modelling trade policy scenarios: Macroeconomic and trade effects of restrictions in cross border labour mobility," OECD Trade Policy Papers 259, OECD Publishing.
    • Handle: RePEc:oec:traaab:259-en
    DOI: 10.1787/b37fa34f-en
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    More about this item

    Keywords

    Computable general equilibrium model; International labour mobility; International trade; METRO model; NIGEM macroeconometric model; Sectoral economic effects;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • C63 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computational Techniques
    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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