Pub Date : 2025-09-01Epub Date: 2025-06-10DOI: 10.1016/j.jpolmod.2025.05.003
Isaac Appiah-Otoo , Jeffrey Dankwa Ampah , Xudong Chen
Sustainable Development Goal 7 stresses the need for countries to expand renewable energy investment since renewable energy addresses global climate change and energy insecurity. However, credit accessibility remains a major obstacle to realising this goal. Financial openness addresses this obstacle; however, empirical evidence on the impact of financial openness on renewable energy investment remains limited. Therefore, this study probes the association between financial openness and renewable energy investment in 18 African countries from 2004 to 2020, focusing on the role of institutional quality. Using the fixed-effects model with Driscoll-Kraay standard errors, the study finds that financial openness is a significant enabler of renewable energy investment in Africa; however, Africa’s weak institutional environment mitigates the positive impact of financial openness on renewable energy investment. The study estimates that Africa must reach a minimum threshold of institutional quality (2.1) on the −2.5–2.5 scale for financial openness to effectively boost renewable energy investment. The study recommends that policymakers enhance the overall institutional framework in Africa for financial openness to effectively drive renewable energy investment.
{"title":"Governance, financial openness, and renewable energy investment in Africa","authors":"Isaac Appiah-Otoo , Jeffrey Dankwa Ampah , Xudong Chen","doi":"10.1016/j.jpolmod.2025.05.003","DOIUrl":"10.1016/j.jpolmod.2025.05.003","url":null,"abstract":"<div><div><span>Sustainable Development Goal<span> 7 stresses the need for countries to expand renewable energy investment since renewable energy addresses global climate change and energy insecurity. However, credit accessibility remains a major obstacle to realising this goal. Financial openness addresses this obstacle; however, empirical evidence on the impact of financial openness on renewable energy investment remains limited. Therefore, this study probes the association between financial openness and renewable </span></span>energy investment in<span> 18 African countries from 2004 to 2020, focusing on the role of institutional quality. Using the fixed-effects model with Driscoll-Kraay standard errors, the study finds that financial openness is a significant enabler of renewable energy investment in Africa; however, Africa’s weak institutional environment mitigates the positive impact of financial openness on renewable energy investment. The study estimates that Africa must reach a minimum threshold of institutional quality (2.1) on the −2.5–2.5 scale for financial openness to effectively boost renewable energy investment. The study recommends that policymakers enhance the overall institutional framework in Africa for financial openness to effectively drive renewable energy investment.</span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 958-976"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997777","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-06-17DOI: 10.1016/j.jpolmod.2025.06.003
Mustafa Yildirim , Mustafa Erhan Bilman
Does hosting the return leg in two-legged soccer ties improve a team’s advancement chances, as some contend, or is this perceived second-leg home advantage merely an illusion, as others argue? This question of competitive fairness is increasingly pertinent in today’s high-stakes soccer environment. While a definitive answer remains elusive, recent rule changes in European soccer, namely the introduction of the video assistant referee (VAR) system and the abolition of the away goals rule (AGR), have added new complexities. Analyzing 906 UEFA Champions League ties (2000/01–2023/24) via weighted logistic regression with robustness checks and team strength controls, we find that a modest second-leg home advantage appears only when AGR is in effect without VAR. Introducing VAR alongside AGR seemingly reverses that advantage, albeit lacking robustness, while neither rule alone nor both absent yields an order effect. Notably, VAR offsets the second-leg home advantage solely in AGR’s presence, while AGR creates that advantage solely in VAR’s absence. Although team quality remains the primary driver of success, these findings illustrate how seemingly innocuous regulatory shifts can redefine competitive fairness. Our results thus offer timely insights for policymakers aiming to design fair and strategically engaging formats in elite European soccer, particularly given the dearth of research on the subject.
{"title":"Second-leg home advantage no more? The impact of video assistant referee and no away goals rule in elite soccer","authors":"Mustafa Yildirim , Mustafa Erhan Bilman","doi":"10.1016/j.jpolmod.2025.06.003","DOIUrl":"10.1016/j.jpolmod.2025.06.003","url":null,"abstract":"<div><div>Does hosting the return leg in two-legged soccer ties improve a team’s advancement chances, as some contend, or is this perceived second-leg home advantage merely an illusion, as others argue? This question of competitive fairness is increasingly pertinent in today’s high-stakes soccer environment. While a definitive answer remains elusive, recent rule changes in European soccer, namely the introduction of the video assistant referee (VAR) system and the abolition of the away goals rule (AGR), have added new complexities. Analyzing 906 UEFA Champions League ties (2000/01–2023/24) via weighted logistic regression with robustness checks and team strength controls, we find that a modest second-leg home advantage appears only when AGR is in effect without VAR. Introducing VAR alongside AGR seemingly reverses that advantage, albeit lacking robustness, while neither rule alone nor both absent yields an order effect. Notably, VAR offsets the second-leg home advantage solely in AGR’s presence, while AGR creates that advantage solely in VAR’s absence. Although team quality remains the primary driver of success, these findings illustrate how seemingly innocuous regulatory shifts can redefine competitive fairness. Our results thus offer timely insights for policymakers aiming to design fair and strategically engaging formats in elite European soccer, particularly given the dearth of research on the subject.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 1097-1112"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997775","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-03-20DOI: 10.1016/j.jpolmod.2025.03.002
Marjan Petreski , Stefan Tanevski , Alejandro D. Jacobo
This study examines the gendered effects of monetary policy shocks in developing economies. Using a modified Taylor rule incorporating foreign reserve movements, we identify country-specific monetary shocks and apply a local projections estimator to analyze gender-disaggregated labor market responses in 99 developing economies from 2009 to 2021. Results indicate that women experience more negative employment effects than men post-shock, particularly in high-growth environments and under monetary tightening. The findings underscore the need for monetary authorities to consider gender disparities in policy formulation and to coordinate with labor and fiscal policies to mitigate adverse effects on women’s labor market outcomes.
{"title":"Monetary policy and labor market dynamics: A gender perspective from developing economies","authors":"Marjan Petreski , Stefan Tanevski , Alejandro D. Jacobo","doi":"10.1016/j.jpolmod.2025.03.002","DOIUrl":"10.1016/j.jpolmod.2025.03.002","url":null,"abstract":"<div><div><span><span>This study examines the gendered effects of monetary policy shocks in developing economies. Using a modified </span>Taylor rule incorporating foreign reserve movements, we identify country-specific monetary shocks and apply a local projections estimator to analyze gender-disaggregated </span>labor market<span> responses in 99 developing economies from 2009 to 2021. Results indicate that women experience more negative employment effects than men post-shock, particularly in high-growth environments and under monetary tightening. The findings underscore the need for monetary authorities to consider gender disparities in policy formulation and to coordinate with labor and fiscal policies to mitigate adverse effects on women’s labor market outcomes.</span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 999-1020"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997779","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-01-07DOI: 10.1016/j.jpolmod.2024.12.004
Tahir Yousaf , Qurat ul Ain
This research article examines the intricate dynamics of transitioning from a centralized to a decentralized governance system, with a specific focus on the autocratic context, using China as a prominent case study. The central argument centers on the concept that autocratic leaders face a challenging holdup problem when implementing sustainable development policies. In situations where effective mechanisms for establishing credible policy commitments are lacking, centralized decision-making often fails to accurately exhibit local preferences, eroding inducements. Decentralization emerges as a powerful mechanism for ensuring sustainable policy commitment by aligning fiscal policies with individual preferences, potentially enhancing efficiency. Our research sheds light on the motivations for autocratic rulers to opt for decentralization as a means of overcoming the challenges associated with centralized decision-making and fostering improved alignment between sustainable development policies and local residents' preferences and productive efforts.
{"title":"Autocratic governance and decentralization in non-democratic regimes: China’s case study","authors":"Tahir Yousaf , Qurat ul Ain","doi":"10.1016/j.jpolmod.2024.12.004","DOIUrl":"10.1016/j.jpolmod.2024.12.004","url":null,"abstract":"<div><div>This research article examines the intricate dynamics of transitioning from a centralized to a decentralized governance system, with a specific focus on the autocratic context, using China as a prominent case study<span>. The central argument centers on the concept that autocratic leaders face a challenging holdup problem when implementing sustainable development policies<span>. In situations where effective mechanisms for establishing credible policy commitments are lacking, centralized decision-making often fails to accurately exhibit local preferences, eroding inducements. Decentralization emerges as a powerful mechanism for ensuring sustainable policy commitment by aligning fiscal policies with individual preferences, potentially enhancing efficiency. Our research sheds light on the motivations for autocratic rulers to opt for decentralization as a means of overcoming the challenges associated with centralized decision-making and fostering improved alignment between sustainable development policies and local residents' preferences and productive efforts.</span></span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 1037-1055"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997781","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-06-11DOI: 10.1016/j.jpolmod.2025.05.002
Idris A. Adediran , Olajide O. Oyadeyi , Tirimisiyu F. Oloko
We observe a disquieting problem: the ineffectiveness of conventional monetary policy instruments, including inflation targeting, to deliver price stability in high-inflation environments. We explore two exciting contributions using an intuitive panel data econometric modelling across M1 2010 and M12 2023. First, we highlight the key drivers of inflation in the countries as mostly non-monetary factors–geopolitical risk, fiscal spending, and inflation expectation–to explain why price stability eludes the monetary authorities. Second, we estimate monetary and fiscal policy rules and find that while price stability remains the overarching goal of monetary policy, the fiscal authorities appear unconcerned despite contributing to the problem. We propose a policy coordination strategy that integrates inflation targeting into both monetary and fiscal policy rules, as well as supply-side initiatives.
{"title":"Inflation and policy coordination in high-inflation environments","authors":"Idris A. Adediran , Olajide O. Oyadeyi , Tirimisiyu F. Oloko","doi":"10.1016/j.jpolmod.2025.05.002","DOIUrl":"10.1016/j.jpolmod.2025.05.002","url":null,"abstract":"<div><div><span><span>We observe a disquieting problem: the ineffectiveness of conventional monetary policy instruments, including </span>inflation targeting, to deliver price stability in high-inflation environments. We explore two exciting contributions using an intuitive panel data </span>econometric modelling across M1 2010 and M12 2023. First, we highlight the key drivers of inflation in the countries as mostly non-monetary factors–geopolitical risk, fiscal spending, and inflation expectation–to explain why price stability eludes the monetary authorities. Second, we estimate monetary and fiscal policy rules and find that while price stability remains the overarching goal of monetary policy, the fiscal authorities appear unconcerned despite contributing to the problem. We propose a policy coordination strategy that integrates inflation targeting into both monetary and fiscal policy rules, as well as supply-side initiatives.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 889-902"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997765","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-04-08DOI: 10.1016/j.jpolmod.2025.03.003
Michael Funke , Raphael Terasa
As an incentive towards twin digital and green investment in the corporate landscape, the German Federal Government has suggested a targeted temporary super depreciation allowance to support much-needed green and digital transitions. Using a calibrated multi-sector DSGE model, we find that the temporary super deduction could trigger an uplift of 10 percentage points for crucial green and digital capital spending, turbo-charging decarbonization and digitization ambitions. However, with the temporary corporate tax policy measure set to end after two years, there is a risk that the higher investment expenditures are levelling out afterwards.
{"title":"Will temporary super depreciation allowances for green and digital investments have knock-on effects?","authors":"Michael Funke , Raphael Terasa","doi":"10.1016/j.jpolmod.2025.03.003","DOIUrl":"10.1016/j.jpolmod.2025.03.003","url":null,"abstract":"<div><div><span>As an incentive towards twin digital and green investment in the corporate landscape, the German Federal Government has suggested a targeted temporary super depreciation allowance to support much-needed green and digital transitions. Using a calibrated multi-sector </span>DSGE<span><span> model, we find that the temporary super deduction could trigger an uplift of 10 percentage points for crucial green and digital capital spending, turbo-charging decarbonization and digitization ambitions. However, with the temporary </span>corporate tax policy measure set to end after two years, there is a risk that the higher investment expenditures are levelling out afterwards.</span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 977-998"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997778","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2025-06-18DOI: 10.1016/j.jpolmod.2025.06.005
Muhammad Arshad Khan , Abdul Rahman , Bashir Ahmed Tareen
Historically, Pakistan remained heavily dependent on domestic and external sources of financing which have strangled economic activities. Excessive public borrowing from domestic sources puts upward pressure on interest rates which crowded out domestic investment. Earlier studies found a linear relationship between debt and private investment. However, these studies overlooked the non-linear behavior of debt. The present study fills the research gap by examining the asymmetric impact of domestic and external debt on private investment. Further, this study attempts to explore whether the domestic and foreign debt crowed-in or crowed-out private investment in Pakistan over the period from 1972 to 2022. To this end, the Non-linear Autoregressive Distributed Lag (NARDL) model has been utilized to capture the positive and negative shocks of domestic and foreign debt on private investment. The empirical outcome confirms the existence of both the long-run and short-run asymmetry between private investment, domestic debt, and external debt in Pakistan. Particularly, the positive shock to domestic debt deters private investment, while the negative shock promotes private investment in the short run. On the other hand, a positive shock to foreign debt enhances private investment in the short-run and the opposite holds for the negative shocks in the long-run. Another important finding is the crowding-out effect of public investment on private investment, which holds true in the short run. Thus, there is a need to curtail the size of domestic debt since its accumulation adversely affects private investment.
{"title":"Is Pakistan in a debt trap? Do domestic and foreign debts crowd-out private investment?","authors":"Muhammad Arshad Khan , Abdul Rahman , Bashir Ahmed Tareen","doi":"10.1016/j.jpolmod.2025.06.005","DOIUrl":"10.1016/j.jpolmod.2025.06.005","url":null,"abstract":"<div><div>Historically, Pakistan remained heavily dependent on domestic and external sources of financing which have strangled economic activities. Excessive public borrowing from domestic sources puts upward pressure on interest rates which crowded out domestic investment. Earlier studies found a linear relationship between debt and private investment. However, these studies overlooked the non-linear behavior of debt. The present study fills the research gap by examining the asymmetric impact of domestic and external debt on private investment. Further, this study attempts to explore whether the domestic and foreign debt crowed-in or crowed-out private investment in Pakistan over the period from 1972 to 2022. To this end, the Non-linear Autoregressive Distributed Lag (NARDL) model has been utilized to capture the positive and negative shocks of domestic and foreign debt on private investment. The empirical outcome confirms the existence of both the long-run and short-run asymmetry between private investment, domestic debt, and external debt in Pakistan. Particularly, the positive shock to domestic debt deters private investment, while the negative shock promotes private investment in the short run. On the other hand, a positive shock to foreign debt enhances private investment in the short-run and the opposite holds for the negative shocks in the long-run. Another important finding is the crowding-out effect of public investment on private investment, which holds true in the short run. Thus, there is a need to curtail the size of domestic debt since its accumulation adversely affects private investment.</div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 1076-1096"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997783","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-09-01Epub Date: 2024-09-19DOI: 10.1016/j.jpolmod.2024.09.001
Nidhi Kaicker
The study assesses the impact of the Covid-19 pandemic on household consumption of alcohol in India, considering both income shocks and supply-side factors. based on a nationally representative household survey conducted by CMIE. Using a 2SLS panel regression model and employing an approach akin to difference-in-differences technique, our study finds that the pandemic induced lockdowns resulted in a sharp increase in the share of alcohol in total expenditure across rural and urban India, and for all income levels. Alcohol consumption varies by education level, by caste, religion, and severity of income shocks. The increased alcohol consumption during the pandemic, and more so among the households that faced a severe income shock, despite the supply restrictions, suggest the stronger impact of stress-response-dampening hypothesis and self-medication hypothesis compared to the income effect. Despite state-imposed supply restrictions, including temporary alcohol shop closures and subsequent reopening with higher taxes, the study raises concerns about a disproportionate rise in alcohol consumption among the most economically impacted. This underscores the need for balanced policy responses, considering both economic stressors and public health imperatives, and emphasizes targeted interventions to mitigate the consequences of increased alcohol consumption during crises.
{"title":"Alcohol consumption response to pandemic induced income shocks in India","authors":"Nidhi Kaicker","doi":"10.1016/j.jpolmod.2024.09.001","DOIUrl":"10.1016/j.jpolmod.2024.09.001","url":null,"abstract":"<div><div>The study assesses the impact of the Covid-19 pandemic on household consumption of alcohol in India<span><span>, considering both income shocks and supply-side factors. based on a nationally representative household survey conducted by CMIE. Using a 2SLS panel regression model and employing an approach akin to difference-in-differences technique, our study finds that the pandemic induced lockdowns<span> resulted in a sharp increase in the share of alcohol in total expenditure across rural and urban India, and for all income levels. Alcohol consumption varies by education level, by caste, religion, and severity of income shocks. The increased alcohol consumption during the pandemic, and more so among the households that faced a severe income shock, despite the supply restrictions, suggest the stronger impact of stress-response-dampening hypothesis and self-medication hypothesis compared to the income effect. Despite state-imposed supply restrictions, including temporary alcohol shop closures and subsequent reopening with higher </span></span>taxes, the study raises concerns about a disproportionate rise in alcohol consumption among the most economically impacted. This underscores the need for balanced policy responses, considering both economic stressors and public health imperatives, and emphasizes targeted interventions to mitigate the consequences of increased alcohol consumption during crises.</span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 5","pages":"Pages 1021-1036"},"PeriodicalIF":3.1,"publicationDate":"2025-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144997780","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2025-07-01Epub Date: 2025-06-30DOI: 10.1016/j.jpolmod.2025.06.009
Barry Eichengreen
{"title":"A tale of debt in three acts","authors":"Barry Eichengreen","doi":"10.1016/j.jpolmod.2025.06.009","DOIUrl":"10.1016/j.jpolmod.2025.06.009","url":null,"abstract":"","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 738-745"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863795","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
North America (Canada, US, Mexico) is a highly inter-connected regional economy (ICRE) with extensive cross-country value chains in production and strong trade, financial, and labor market links. The impact of new US deportation policy would affect the US economy in the short to medium term by reducing the labor force by nearly five percent as foreign-born labor leaves the country or drops out of the labor market. Analysis with a global computable general equilibrium (CGE) simulation model indicates that the shock would cause a supply-side recession in the US and reduce real GDP by four percent. The wage in the labor markets with high participation of the remaining undocumented labor would increase, which would provide an incentive for increased future migration. There would also be a decline in the wage of native-born workers; studies indicate that they are complements not substitutes for non-native labor in their sectors of employment. The US macro shock would also induce macro shocks to both Mexico and Canada, yielding reductions in their GDP. In addition, there would be a dramatic decline in remittance flows from foreign-born workers to their countries of origin. For Mexico, the reduction in remittances would lead to a financial shock due to lost foreign exchange, resulting in a major depreciation of the real exchange rate and changes in macro aggregates: lower GDP, lower imports, increased exports, and much lower aggregate final demand. The financial shock in Mexico would feed back to Canada and the US, affecting the sectoral composition of trade and production in both countries. In sum, the impact of US policies to remove foreign-born labor would reverberate across all three countries, damaging their economies and weakening economic integration in North America.
{"title":"The impact of US deportation policies on the US, Canadian, and Mexican economies","authors":"Karen Thierfelder , Sherman Robinson , Raul Hinojosa-Ojeda","doi":"10.1016/j.jpolmod.2025.06.010","DOIUrl":"10.1016/j.jpolmod.2025.06.010","url":null,"abstract":"<div><div>North America (Canada, US, Mexico) is a highly inter-connected regional economy (ICRE) with extensive cross-country value chains in production and strong trade, financial, and labor market<span><span><span> links. The impact of new US deportation policy would affect the US economy in the short to medium term by reducing the labor force by nearly five percent as foreign-born labor leaves the country or drops out of the labor market. Analysis with a global computable general equilibrium<span> (CGE) simulation model indicates that the shock would cause a supply-side recession in the US and reduce real GDP by four percent. The wage in the labor markets with high participation of the remaining undocumented labor would increase, which would provide an incentive for increased future migration. There would also be a decline in the wage of native-born workers; studies indicate that they are complements not substitutes for non-native labor in their sectors of employment. The US macro shock would also induce macro shocks to both Mexico and Canada, yielding reductions in their GDP. In addition, there would be a dramatic decline in </span></span>remittance<span><span> flows from foreign-born workers to their countries of origin. For Mexico, the reduction in remittances would lead to a financial shock due to lost foreign exchange, resulting in a major depreciation of the real exchange rate and changes in </span>macro aggregates: lower GDP, lower imports, increased exports, and much lower aggregate final demand. The financial shock in Mexico would feed back to Canada and the US, affecting the sectoral </span></span>composition of trade<span> and production in both countries. In sum, the impact of US policies to remove foreign-born labor would reverberate across all three countries, damaging their economies and weakening economic integration in North America.</span></span></div></div>","PeriodicalId":48015,"journal":{"name":"Journal of Policy Modeling","volume":"47 4","pages":"Pages 746-767"},"PeriodicalIF":3.1,"publicationDate":"2025-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144863796","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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