Covid-19 Shocking Global Value Chains

Peter Eppinger, Gabriel Felbermayr, Oliver Krebs and Bohdan Kukharskyy

No 8572, CESifo Working Paper Series from CESifo

Abstract: 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 transmitting the 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 are magnified 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.

Keywords: Covid-19; quantitative trade model; input-output linkages; global value chains; supply chain contagion; shock transmission (search for similar items in EconPapers)
JEL-codes: F11 F12 F14 F17 F62 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-cna, nep-int and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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