Benedikt Heid

Migration, Trade and Unemployment

A source of anxiety of policy makers and the public in general is the detrimental impact of trade and immigration on unemployment. The transitory restrictions for worker migration after the EU enlargements of 2004 and 2007 exemplify the supposed negative effect of immigration on labor markets. This paper aims to identify the effects of immigration alongside trade on unemployment controlling for the high correlation between immigration and goods flows in order to prevent an omitted variable bias. The authors use data from 24 OECD countries over the period from 1997 to 2007 and employ instrumental variables fixed effects and dynamic panel estimators in order to account for unobserved heterogeneity as well as the potential endogeneity of migration flows and the high persistence of unemployment. We find no significant effect of immigration on unemployment on average.

The Rise of the Maquiladoras: A Mixed Blessing

Mexico experienced a tremendous expansion of its export‐processing maquila sector during the 1990s. Since one of the main objectives of the maquiladora program was to promote formal employment, we study how the rapid increase in maquiladora activity has affected labor market outcomes and welfare in Mexico. We develop a heterogeneous‐firm model with imperfect labor markets that captures salient features of the Mexican economy such as the differences between maquila and non‐maquila manufacturing plants and the existence of an informal sector. We calibrate the models parameters to match key cross‐sectional moments characterizing the Mexican economy. We find that the expansion of the maquila sector during the 1990s was a mixed blessing for Mexico. Our quantitative model indicates that the skill premium decreased by 2.7%, informality increased by 0.9%, and overall welfare decreased by 3.7%.

Maquiladoras and Informality: A Mixed Blessing

Mexico experienced a tremendous expansion of its export-processing maquila sector during the 1990s. At the same time, a large proportion of its labor force remains employed in the informal sector. Since one of the main objectives of the maquiladora program was to increase formal employment, we study how the rapid increase in maquiladora activity has affected labor market outcomes in Mexico. We develop a heterogeneous firm model with imperfect labor markets that captures salient features of the Mexican economy such as the differences between maquila and non-maquila manufacturing plants and the existence of an informal sector. We calibrate the models parameters to match key cross-sectional moments characterizing the Mexican economy. Our quantitative model indicates that the expansion of the maquila sector during the 1990s produced an increase in informality of 0.9% and a reduction in the skill premium and overall welfare of 2.7% and 3.7%, respectively. A counterfactual experiment in which we shut down the informal sector completely results in a reduction of Mexican welfare of 33.5% relative to the equilibrium with an informal sector.

Trade Integration in Enlarged Europeanunion - Poland's Road to Success?

The paper focuses on Polands distinctly changing foreign trade patterns in the course of economic transformation and EU accession. In order to shed more light on the structure of Polands integration into the European division of labor the Polish trade flows are analyzed by applying a filtered gravity approach. This model combines a trade-type-decomposition of trade - distinguishing between inter-industry trade as well as vertical and horizontal intra-industry trade - with a gravity approach of the country model type. The estimates show that the rapidly growing exports to Western Europe go in line with a significantly higher share of both types of intra-trade of intra-trade with these countries, in particular with Polands main partner Germany, indicating a growing exchange of technology intensive goods. Apparently, Polands economy has been integrated into Western European networks of production. In addition, the estimates show a regional integration with the Visegrad partners characterized by a perceptible level of intra-industry trade as well. It is concluded that Polands extensive participation in the Western and Central European division of labor contributes significantly to the modernization of the Polish economy.