Welfare and equity impacts of cross-border factor mobility in Bangladesh: A general equilibrium analysis |
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| Affiliation: | 1. Research Fellow, Japan Society for the Promotion of Science (JSPS), Japan;2. National Graduate Institute for Policy Studies (GRIPS), Japan;3. Department of Economics, Jagannath University, Bangladesh;1. Bangor University, UK;2. University of Durham, UK;3. ESCA School of Management, Morocco;4. Alliant International University, USA;1. School of Economics and Trade, Hubei University of Economics, Wuhan, 430205, China;2. Wenlan School of Business, Zhongnan University of Economics and Law, Wuhan, 430073, China;1. Banque de France, Financial Stability Directorate, 31 rue Croix des Petits Champs, 75001, Paris, France;2. European Central Bank, Directorate General of Macroprudential Policy and Financial Stability, Sonnemannstraße 20, 60314 Frankfurt am Main, Germany |
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| Abstract: | We develop a dynamic computable general equilibrium model with cross-border factor mobility to assess the impacts of a foreign wage shock and the effects of counteractive policy measures in Bangladesh. The model features migration of workers and foreign direct investment (FDI) in the ready-made garments (RMG) sector. Our simulation results show that returning migrants induced by a foreign wage fall would reduce household welfare by lowering wages and increasing unemployment, particularly for unskilled workers in the domestic labor market. To counteract this negative shock, FDI promotion in the RMG sector and a human-capital development program are considered. The former policy minimizes the negative impacts of the foreign labor market shock, while a combination of both policies is more equitable. |
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| Keywords: | Migration Remittances Foreign direct investment Computable general equilibrium analysis C68 F21 F22 O15 |
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