Global Supply Chains in the Pandemic

55 Pages Posted: 20 May 2020 Last revised: 14 May 2021

See all articles by Barthélémy Bonadio

Barthélémy Bonadio

University of Michigan at Ann Arbor - Department of Economics

Zhen Huo

Yale University - Department of Economics

Andrei A. Levchenko

University of Michigan - Department of Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Nitya Pandalai-Nayar

University of Texas at Austin - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2020

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.

JEL Classification: F41, F44

Suggested Citation

Bonadio, Barthélémy and Huo, Zhen and Levchenko, Andrei A. and Pandalai-Nayar, Nitya, Global Supply Chains in the Pandemic (May 2020). Available at SSRN: https://ssrn.com/abstract=3603998

Barthélémy Bonadio (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
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Zhen Huo

Yale University - Department of Economics ( email )

28 Hillhouse Ave
New Haven, CT 06520-8268
United States

Andrei A. Levchenko

University of Michigan - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

HOME PAGE: http://alevchenko.com

National Bureau of Economic Research (NBER) ( email )

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Nitya Pandalai-Nayar

University of Texas at Austin - Department of Economics ( email )

Austin, TX 78712
United States

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