Brexit, Trade in Intermediates, and Global Value Chains: Beyond the UK and the EU (2021) (Updated: November 2022)
The discussion on Brexit has focused mostly on the future trade relationship between the EU and the UK. However, Brexit will also have significant impacts on the rest of the world, most often ignored in the public debate, particularly in countries that have the UK as their major trading partner. Many of these countries also rely on the larger EU markets for imports. In this paper, I estimate the impact of several post-Brexit trade policies on welfare gains from trade and global value chain patterns - for the UK, the EU27, and the rest of the world. First, I build a multi-country multi-sector static general equilibrium model of trade policy shocks, which is a variant of the Armington model, to quantify the impact of these different post-Brexit scenarios. Second, for counterfactual exercises, I calibrate the model to match the 2015 Eora input-output data and the state of the world before Brexit. The potential post-Brexit scenarios include Hard Brexit, Soft Brexit, UK-EU FTA (TCA), UK-USA FTA, and UK-EU-USA FTA. I find hard Brexit as the worst-case, with losses ranging from 0.04 to 1.88 percent and an average loss of 0.27 percent in total consumption-equivalent welfare of households. Also, I find that the UK-EU FTA (TCA) led to losses for all countries except for the USA, but losses were minimal compared to a Hard Brexit. The effect on GVC patterns is significant for countries other than the UK and the EU. Japan, China, Singapore, South Korea, Hong Kong, Kenya, etc., are some countries affected the most.
Universal Basic Income, Targeted Cash Transfers, and Progressive Taxation: Reducing Income Inequality in South Africa (2019) (Updated: December 2022)
South Africa has one of the world’s most progressive tax systems, yet income inequality remains a significant challenge for the country. Several fiscal policy initiatives have been implemented since the end of apartheid to reduce the high levels of inequality and poverty. Despite this, there has been no significant reduction in inequality in post-apartheid South Africa. Universal basic income (UBI) and better progressive taxation can be a new way to address the limited strength of fiscal policies in South Africa. In developing countries, however, data on income is limited for most of the population working in the informal sector. Additionally, inclusion in the formal tax system is low. This paper compares the magnitude by which UBI versus targeted cash transfer (TCT) funded by progressive taxation can reduce income inequality in South Africa. Empirically, I conduct a policy simulation exercise to analyze how additional revenue generated from tax progressivity can be used to finance UBI and TCT and to what extent this can reduce income inequality. Results show that UBI and TCT reduce income inequality by more than 30% when these policies are accompanied and financed through progressive taxation; however, TCT reduces inequality more than UBI.
The Impact of Education Reforms on Household Adult Welfare Outcomes in Ethiopia: The 1994 Free Primary Education (FPE) Reform (2018) (Updated: August 2022)
This study examines the effect of free primary education reform on years of schooling and on various indicators of welfare in Ethiopia. Welfare is measured using multiple poverty indicators, including per adult equivalent consumption expenditure, relative deprivation in terms of consumption expenditure, and poverty gap. Using variation in individuals’ dates of birth at the time of the reform as a source of exogenous variation in education, cohorts of age 14 and younger in 1994, who were either in pre-school or primary school, are presumed to be exposed to the reform, whereas those above age 14 are presumed not to be exposed. I used both difference-in-differences (DID) and instrumental variable estimation strategies to estimate the impact of the reform on education, and the causal impact of education on adult welfare outcomes. Preliminary results show that the reform led to an increase in years of schooling of 1.102 years (without controls) and 1.07 years (with controls), and increased the welfare of individuals who were age 8 or younger in 1994. Therefore, in general the reform increased the education and welfare outcomes of individuals age 8 or younger in 1994, who were likely to be in preschool or in the first cycle of primary school when the reform started.
Selected WIP Coming Soon
School Resources and Education Outcomes in Developing Countries. Glewwe, P., Siameh, C., Sun, B., & Wisniewski, S. (2021). The Routledge Handbook of the Economics of Education, edited by Brian McCall.