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Integrating a Global Supply Chain Model With a Computable General Equilibrium Model

Peter Dixon and Maureen Rimmer

Centre of Policy Studies/IMPACT Centre Working Papers from Victoria University, Centre of Policy Studies/IMPACT Centre

Abstract: Global supply chain (GSC) trade results from decisions by firms producing final goods to allocate underlying tasks to dedicated facilities in different countries. These decisions create cross-border flows of products at various stages of completion. We demonstrate a divide-and-conquer approach to integrating GSC and computable general equilibrium (CGE) models: the models are solved separately and information is passed between them. A stylized integrated model suggests that by providing low-skilled jobs in developing countries, GSC trade accelerates the transfer of labour out of low-marginal-productivity agriculture in these countries into higher-marginal-productivity manufacturing. At the same time, GSC trade can leave high-income countries having to transfer considerable fractions of their workforce out of manufacturing and into services. After potentially expensive structural adjustment, high-income countries may be left in the long run with no more than a small equilibrium welfare gain or even a loss.

Keywords: Global; supply; chain; trade; computable; general; equilibrium; CSC-CGE; integration; benefits/costs; of; GSC (search for similar items in EconPapers)
JEL-codes: F12 C68 C63 (search for similar items in EconPapers)
Date: 2019-05
New Economics Papers: this item is included in nep-cmp and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:cop:wpaper:g-292

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