Arbeitspapier

Covid-19 shocking global value chains

In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmittingthe shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects aremagnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.

Language
Englisch

Bibliographic citation
Series: Kiel Working Paper ; No. 2167

Classification
Wirtschaft
Neoclassical Models of Trade
Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
Empirical Studies of Trade
Trade: Forecasting and Simulation
Economic Impacts of Globalization: Macroeconomic Impacts
Subject
Covid-19
quantitative trade model
input-output linkages
global value chains
supply chain contagion
shock transmission

Event
Geistige Schöpfung
(who)
Eppinger, Peter S.
Felbermayr, Gabriel
Krebs, Oliver
Kukharskyy, Bohdan
Event
Veröffentlichung
(who)
Kiel Institute for the World Economy (IfW)
(where)
Kiel
(when)
2020

Handle
Last update
10.03.2025, 11:43 AM CET

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Object type

  • Arbeitspapier

Associated

  • Eppinger, Peter S.
  • Felbermayr, Gabriel
  • Krebs, Oliver
  • Kukharskyy, Bohdan
  • Kiel Institute for the World Economy (IfW)

Time of origin

  • 2020

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