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

Zhen Yu, Yuankun Li and Xubin Xie

Economic Analysis and Policy, 2021, vol. 71, issue C, 16-40

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.

Keywords: Infectious diseases; Trade; Prejudice effect; Long-term impact (search for similar items in EconPapers)
JEL-codes: F14 I15 I18 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.eap.2021.04.003

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