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Long-term trade impact of epidemic outbreaks: Is it V-shaped?

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  • Yu, Zhen
  • Li, Yuankun
  • Xie, Xubin

Abstract

Despite extensive discussion about the shape of post-pandemic trade recovery after the COVID-19 outbreak, no consensus has been reached. Using 414 outbreaks as exogenous shocks from 1951 to 2015 and matching bilateral trade data, we find that outbreaks have a significant long-term negative impact on the export of affected countries. The results show that it takes at least five years after the end of an epidemic for the export levels of affected countries to recover to the ex-ante average. Our mechanism analysis shows that the prejudice generated by an outbreak has long-lasting adverse effects on exports. Our heterogeneity analysis shows that the negative impact of epidemic prejudice on exports is more pronounced for trading partners with greater linguistic and cultural differences, weaker political ties, and larger income gaps. Our findings contribute to understanding the post-pandemic global trade recovery process and validate behavioral economics and social psychology theories.

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  • Yu, Zhen & Li, Yuankun & Xie, Xubin, 2021. "Long-term trade impact of epidemic outbreaks: Is it V-shaped?," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 16-40.
    • Handle: RePEc:eee:ecanpo:v:71:y:2021:i:c:p:16-40
    DOI: 10.1016/j.eap.2021.04.003
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    More about this item

    Keywords

    Infectious diseases; Trade; Prejudice effect; Long-term impact;
    All these keywords.

    JEL classification:

    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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