included in column (7), suggesting that on average, all the transmission shocks had a role in explaining the impact of the pandemic on export growth.

We next move to the sectoral analysis and estimate equation (2) which combines all the different transmission channels identified in the framework in Figure 2. The results using OLS are reported in Table 2. Column 1 assesses the relationship between supply shocks in exporting countries and bilateral export growth through the production and GVC channels. The first interaction term ( _work mobilityit*remoteik_ ) captures the role of remote work in mitigating the negative impact of the supply shock on export growth through the production channel.<sup>22</sup> A positive and statistically significant coefficient at the 1%-level, suggests that a higher percentage of occupations that can be performed remotely in a sector mitigates the negative trade effect of a production shock in exporting countries. For example, in country-sectors such as Hungary’s manufacture of pulp, paper and paperboard, where less than one-third of occupations can be performed remotely (country-sectors in the first quartile of the distribution of the remote variable), the negative effect of Covid-19 through decreased work mobility is 19 percentage points larger than for the manufacture of electric motors, generators and transformers in countries such as Japan, where more than two-thirds of production can be done remotely.<sup>23</sup> The second interaction term presented in column (1) ( _work mobilityit*gvcil_ ) captures the relationship between the supply shock and export growth through the GVC channel. The estimated coefficient suggests that the trade effect of a negative shock in exporting countries is lower in sectors that rely more strongly on imported inputs for their exports. This supports the hypothesis that importing inputs can help alleviate the impact of domestic supply shocks. We can calculate the impact of reduced mobility for different percentiles of GVC participation in an exporting country and sector. The negative impact of a decrease in mobility for country-sectors in the first quartile of the distribution, where imported inputs account for less than one-quarter of total exports (e.g. Spain manufactures of agricultural and forestry machinery), is 20 percentage points higher than for country-sectors in the third quartile of the distribution

> 22 Rather than including work mobility separately in the regression, the production shock in the exporting country is captured by the exporter-time fixed effect.

> 23 We cannot compute the total effect of the exporter shock on bilateral export growth accounting for differences in remoteness because equation (2) does not include the exporter shock individually, but controls for it using exporter-time fixed effects.  The total effect would be given as follows: (coefficient of exporter shock + _ß1_ * _remoteik_ ). W e can, however, compare the differential impact at two selected points of the distribution in remoteness ( _ß1_ * _remoteik_ ) . From Table 1, column (4) we obtain _ß1_ = 1.587 which is multiplied with the remoteness share at the first quartile of the distribution (Q1=31.4%) and again with remoteness share at the third quartile of the distribution (Q3=43.5%). Taking the interquartile difference yields 1.587*(43.5%-31.4%) = 19.2%pts.

16