How Did GVC-Trade Respond to Previous Health Shocks? Implications for COVID-19

41 Pages Posted: 10 Sep 2020 Last revised: 6 Mar 2021

See all articles by Anirudh Shingal

Anirudh Shingal

S.P. Jain Institute of Management & Research; European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS); University of Bern - World Trade Institute

Prachi Agarwal

Center for Economic Studies and Planning, Jawaharlal Nehru University

Date Written: August 31, 2020

Abstract

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

Shingal, Anirudh and Agarwal, Prachi, How Did GVC-Trade Respond to Previous Health Shocks? Implications for COVID-19 (August 31, 2020). Available at SSRN: https://ssrn.com/abstract=3689003 or http://dx.doi.org/10.2139/ssrn.3689003

Anirudh Shingal (Contact Author)

S.P. Jain Institute of Management & Research ( email )

Munshi Nagar, Dadabhai Road
Andheri West
Mumbai, Maharashtra 119579
India

European University Institute - Robert Schuman Centre for Advanced Studies (RSCAS) ( email )

Villa La Fonte, via delle Fontanelle 18
50016 San Domenico di Fiesole
Florence, Florence 50014
Italy

University of Bern - World Trade Institute ( email )

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Bern, 3012
Switzerland

HOME PAGE: http://www.nccr-trade.org

Prachi Agarwal

Center for Economic Studies and Planning, Jawaharlal Nehru University ( email )

New Delhi
India

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