Global Supply Chains in the Pandemic

48 Pages Posted: 26 May 2020

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 for 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. Using the quantitative framework and methods developed in Huo, Levchenko and Pandalai-Nayar (2020), we show that the average real GDP downturn due to the Covid-19 shock is expected to be -31.5%, of which -10.7% (or one-third of the total) 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. The average GDP drop would have been -32.3% in a world without trade in inputs and final goods. This is because eliminating reliance on foreign inputs increases reliance on the domestic inputs, which are also subject to lockdowns. Whether renationalizing supply chains insulates a country from the pandemic depends on whether it plans to impose a more or less stringent lockdown than its trading partners. Finally, unilateral lifting of the lockdowns in the largest economies can contribute as much as 6-8% to GDP growth in some of their smaller trade partners.

Suggested Citation

Bonadio, Barthélémy and Huo, Zhen and Levchenko, Andrei A. and Pandalai-Nayar, Nitya, Global Supply Chains in the Pandemic (May 2020). NBER Working Paper No. w27224, Available at SSRN: https://ssrn.com/abstract=3609677

Barthélémy Bonadio (Contact Author)

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

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

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 )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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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