Global Supply Chains in the Pandemic

Andrei Levchenko, Barthélémy Bonadio, Zhen Huo and Nitya Pandalai-Nayar

No 14766, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We study the role of global supply chains in the impact of the Covid-19 pandemic on GDP growth using a multi-sector quantitative framework implemented on 64 countries. We discipline the labor supply shock across sectors and countries using the fraction of work in the sector that can be done from home, interacted with the stringency with which countries imposed lockdown measures. One quarter of the total model-implied real GDP decline is due to transmission through global supply chains. However, "renationalization" of global supply chains does not in general make countries more resilient to pandemic-induced contractions in labor supply. This is because eliminating reliance on foreign inputs increases reliance on the domestic inputs, which are also disrupted due to nationwide lockdowns. In fact, trade can insulate a country imposing a stringent lockdown from the pandemic-shock, as its foreign inputs are less disrupted than its domestic ones. Finally, unilateral lifting of the lockdowns in the largest economies can contribute as much as 2.5% to GDP growth in some of their smaller trade partners.

Keywords: Production networks; International transmission; Pandemic; Covid-19 (search for similar items in EconPapers)
JEL-codes: F41 F44 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-int
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Citations: View citations in EconPapers (102)

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Related works:
Journal Article: Global supply chains in the pandemic (2021)
Working Paper: Global Supply Chains in the Pandemic (2021)
Working Paper: Global Supply Chains in the Pandemic (2020)
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