Disparities in the Cost of Living Changes after a Large-Scale Devaluation: The Case of Egypt 2016

In November 2016 Egypt went through a massive devaluation of its currency. This was followed by a jump in prices, particularly for traded goods including food, and particularly in Rural Lower, Rural Upper and Urban Lower regions. Using data from the Central Bank of Egypt and microdata from the 2008-2015 Household Income, Expenditure and Consumption Surveys, this study investigates the pass-through of exchange rate changes to prices of various commodities across all regions and, through households’ consumption and substitution patterns, the implications for households’ cost of living and welfare. Predictions of the one-month and sixmonth impacts of the November 2016 devaluation are made. Our results show that typically 4% of exchange rate changes are passed through to prices immediately, and cumulatively approximately 9% are passed through over the six months after devaluation. Accounting for households’ consumption patterns, we compute fixed-weight Laspeyres price indices and cost of living indices to compare the impact of the devaluation to a counterfactual scenario without it. We find that the cost of living of an average household rises by as much as 50% following the devaluation, and the household’s expenditure would have had to rise by twice as much after the devaluation to maintain its 2015 real expenditure level, compared to the counterfactual. These effects are higher still among households in the poorest income quintiles in all regions, according to all cost-of-living measures

Return Migration and Socioeconomic Mobility in MENA: Evidence from Labor Market Panel Surveys

This study examines the effects of cross-border return migration on intertemporal and intergenerational transmission of socio-economic status across six new harmonized surveys from three Arab countries: Egypt (1998, 2006, 2012), Jordan (2010, 2016) and Tunisia (2014). We link individuals’ current outcomes to those in prior years and to their parents’ outcomes. We first isolate the outcomes of interest – income, employment status, household wealth based on both productive and nonproductive assets, and residence status. Next, we evaluate individuals’ socioeconomic mobility over time and across generations as a function of their migration histories. Return migrants, current migrants, and non-migrants are distinguished. Transitions in individuals’ outcomes across years and generations are made functions of pre-existing socioeconomic status, demographics and migration status. Migration patterns are found to differ systematically between Egypt, Jordan and Tunisia, as well as across years. Migration destination is driven by economic, geographic but also historical considerations. Migrant flow from Egypt and Tunisia is highly concentrated, but that from Jordan is much more diffused, on account of job search methods and type of work sought. Egyptian migrants predominantly come from rural areas and disadvantaged governorates, and are less educated, while in Jordan the opposite is the case. Tunisia represents an intermediate case, with migrants slightly less educated but also less likely to be rural than non-migrants. Return migrants find employment in higher earning occupations and are more socially and intergenerationally mobile than non-migrants. However, they outperform non-migrants not only currently, but also in the previous occupation, occupation before previous, and eight years prior, suggesting that individual-level effects and demographics contribute more than migration experience per se. More research is needed to isolate the causal effects of migration spells on migrants’ lifetime outcomes

Socioeconomic mobility of return migrants: evidence from Jordanian labor market surveys

While the consequences of overseas migration for economic inequalities are well-documented, a relatively less researched aspect is well-being and socio-demographic status of those who chose to return to their country of origin. This paper therefore profiles returnee migrants in the Jordanian labor market as well as the causes and consequences of migration for workers’ outcomes using the 2010 and 2016 waves of the Jordanian Labor Market Panel Survey. We study changes in socioeconomic status within and across generations, linking male workers’ current outcomes to those in prior years (across different points in their careers and to their fathers’ outcomes. We assess inter-temporal social mobility as a function of their prior migration experience, socioeconomic status and demographics. In addition, we present regression evidence of how they fare in the labor market in terms of wage returns. Our data show that migration flows evolve o ver time, a nd are d riven b y s ocioeconomic a nd location-specific considerations. More specifically, migration flow from Jordan is geographically highly diffused by regional standards, as Jordanians seek high-skill jobs through formal recruiting channels. Jordanian migrants typically come from urban areas and are more educated. Return migrants are concentrated in higher earning occupations. Altogether this suggests that the labor migration process in Jordan is subject to a selection bias. However, even after controlling for background differences, we find some evidence of beneficial effect of migration for social mobility. Migrants outperform non-migrants not only in terms of current outcomes, but also in their previous occupations as well as those they held 8–10 years earlier, implying that workers’ predispositions may play a role

Trade liberalization, inter-industry wage differentials and job quality in Egyptian manufacturing

This paper investigates the impact of trade openness on wage and job quality outcomes in the Egyptian manufacturing sector over a period of rapid trade liberalization. We utilize newly available panel labor market survey data for 1998–2006, merge it (at the two-digit industry level) with trade variables that capture export orientation, import penetration as well as direct policy change relating to reduction of average tariffs, and use the merged data set to estimate a two-stage inter-industry wage and job quality premia model. Our results highlight that institutional factors of job quality (social security, medical insurance, a contract, paid casual leave, paid sick leave, and whether the worker is a member of a trade union) have the strongest correlation with the trade variables and the industry-specific characteristics used in the analysis. Tariff reduction per se, does not seem to have had a significant impact on either wages or job quality over this period. On the other hand, increased export orientation exerts a strong positive impact on wages, but a significant negative impact on all job quality indices in many specifications. Finally, industries with the highest import penetration levels have the lowest job quality, but those that had the largest increase in import penetration actually also saw large improvements in job quality. The above results underscore the clear distinction between wage and job quality outcomes in the Egyptian labor market, and the importance of separating the two when examining the effect of trade policy on labor

Multinational Corporations and Knowledge Flows: Evidence from Patent Citations

This study investigates whether foreign direct investment (FDI) by a multinational corporation increases the likelihood that knowledge about new technologies and production processes will be exchanged between foreign and domestic firms. This could be an important channel for knowledge diffusion since such flows have proven to be highly geographically localized. I develop a framework for measuring the degree to which the close proximity of a multinational subsidiary can enhance flows of knowledge between firms of different countries. I use an original data set on the innovative activity of firms of more than 30 countries and find a strong positive effect of both inward and outward FDI on knowledge flows. Interestingly, I find that countries that are technological followers gain three times as much knowledge from inward FDI as leaders.