Spillovers in global production networks

Erik Frohm and Vanessa Gunnella ()

Review of International Economics, 2021, vol. 29, issue 3, 663-680

Abstract: This paper studies the role of global input–output linkages in transmitting economic disturbances in the international economy. Our empirical results find that these links are both statistically significant and of economic importance for generating spillovers. We also provide evidence that it is not the inter‐linkages per se that matter for the international transmission but rather the presence of global hub sectors that are either large suppliers or purchasers of other sectors' inputs. When the links between these sectors and the rest of the global value chain are severed, the spillovers diminish strongly and eventually become statistically insignificant. This highlights the importance of the structure of the production network for enabling spillovers and outlines the prominent role played by hub sectors in the global economy.

Date: 2021
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