Geopolitics along the value chains

Renjing Chen, Chenxin Jin, Wei Jin, Bin Sheng and Guanxiang Wang

China Economic Review, 2025, vol. 90, issue C

Abstract: This paper examines the intricate interplay between geopolitics and global value chains (GVCs) in shaping international trade dynamics. By developing indices of voting similarity from United Nations General Assembly data, we quantify the influence of geopolitical relationships on trade flows and economic welfare. Utilizing a structural approach grounded in the World Input–Output Database, we estimate the elasticity of geopolitics across various sectors, distinguishing between intermediate goods and final consumption. Our findings reveal significant trade and welfare implications of geopolitical relationships, highlighting how political alignment or discord influences economic outcomes across countries. Through counterfactual analyses, we explore scenarios such as the Israeli–Palestinian Conflict, the Russo–Ukrainian War, and the China–United States Trade Disputes, providing insights into how geopolitical shifts could reshape GVCs and economic performance globally. The results underscore the importance of considering geopolitical factors in trade policy and economic strategy formulation.

Keywords: Geopolitics; Global value chains; Trade effects; Welfare effects (search for similar items in EconPapers)
JEL-codes: F1 F2 F5 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:90:y:2025:i:c:s1043951x2400230x

DOI: 10.1016/j.chieco.2024.102341

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