Rekindling New Economic Geography in Times of COVID-19: Labor Mobility Responses to Health Shocks in Central and North America

This paper evaluates the potential responses of international labor mobility to the recent COVID-19 health shocks, using a New Economic Geography model inspired by recent events in Central and North America. The model suggests that the restraining impact of COVID-19 on migratory flows may retain potential emigrants in Mexico and Central America, enlarge the home market in the region, attract foreign and local businesses, and increase real wages. Moreover, this prediction unveils opportunities for the future from the opening of new, regular migratory pathways between Central America and Mexico. These would concentrate population and industry in Mexico, raise the market potential in the area and boost real wages in Mexico – and possibly in Central America as well – despite the partial deindustrialization of the Central American hinterland.

Effects of COVID-19 on trade flows: Measuring their impact through government policy responses.

This paper examines the impact of COVID-19 on bilateral trade flows using a state-of-the-art gravity model of trade. Using the monthly trade data of 68 countries exporting across 222 destinations between January 2019 and October 2020, our results are threefold. First, we find a greater negative impact of COVID-19 on bilateral trade for those countries that were members of regional trade agreements before the pandemic. Second, we find that the impact of COVID-19 is negative and significant when we consider indicators related to governmental actions. Finally, this negative effect is more intense when exporter and importer country share identical income levels. In the latter case, the highest negative impact is found for exports between high-income countries.