How Did GVC-Trade Respond to Previous Health Shocks? Implications for COVID-19
41 Pages Posted: 10 Sep 2020 Last revised: 6 Mar 2021
Date Written: August 31, 2020
Using diﬀerence-in-diﬀerence analysis in a gravity model, we examine the response of GVC-trade to two previous health shocks, SARS and MERS. Our baseline estimates suggest a decline in GVC-trade, both gross and value-added, from SARS, emanating from supply and demand shocks, though a similar eﬀect is not observed for MERS. There is some evidence for “reshoring” and “near-shoring” in the stylized facts on SARS while empirical analysis also suggests geographical diversiﬁcation of value chains due to MERS and their non-resilience to SARS in particular. The ﬁndings are observed at both the intensive (value) and extensive (number of products) margins and for both intermediate and ﬁnal goods. The SARS eﬀects are driven by non-OECD countries that were also more integrated and downstream in GVCs, and by products that were less capital- and technology-intensive. We expect similar disruptions to GVC-trade from COVID-19.
Keywords: GVC-trade, health shocks, COVID-19, reshoring, near-shoring, GVC-disruptions
JEL Classification: F1
Suggested Citation: Suggested Citation