Economic Costs of Friend-shoring

Beata Javorcik, Lucas Kitzmueller, Helena Schweiger and Muhammed A. Yildirim
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Muhammed A. Yildirim: Center for International Development at Harvard University

No 192, Growth Lab Working Papers from Harvard's Growth Lab

Abstract: Geo-political tensions and disruptions to global value chains have led policymakers to reevaluate their approach to globalisation. Many countries are considering regionalisation and friend-shoring – trading primarily with countries sharing similar values – as a way of minimising exposure to weaponisation of trade and securing access to critical inputs. If followed through, this process has the potential to reverse global economic integration of recent decades. This paper estimates the economic costs of friend-shoring using a quantitative model incorporating inter-country inter-industry linkages. The results suggest that friend-shoring may lead to real GDP losses of up to 4.6% of global GDP. Thus, although friend-shoring may provide insurance against extreme disruptions and increase the security of supply of vital inputs, it would come at a significant cost.

Keywords: Friend-shoring; Regionalisation; Global Trade and Production Network; International I-O Linkages (search for similar items in EconPapers)
JEL-codes: F15 F51 F60 R15 (search for similar items in EconPapers)
Date: 2022-09
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https://growthlab.cid.harvard.edu/files/growthlab/ ... 2-friend-shoring.pdf (application/pdf)

Related works:
Journal Article: Economic costs of friendshoring (2024)
Working Paper: Economic Costs of Friend-Shoring (2023)
Working Paper: Economic Costs of Friend-shoring (2022)
Working Paper: Economic costs of friend-shoring (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:glh:wpfacu:192

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