COVID-19 Shocking Global Value Chains

39 Pages Posted: 7 Oct 2020

See all articles by Peter Eppinger

Peter Eppinger

University of Tuebingen

Gabriel J. Felbermayr

Kiel Institute for the World Economy

Oliver Krebs

University of Würzburg

Bohdan Kukharskyy

City University of New York (CUNY)

Date Written: 2020

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

JEL Classification: F110, F120, F140, F170, F620

Suggested Citation

Eppinger, Peter and Felbermayr, Gabriel J. and Krebs, Oliver and Kukharskyy, Bohdan, COVID-19 Shocking Global Value Chains (2020). CESifo Working Paper No. 8572, Available at SSRN: https://ssrn.com/abstract=3702124

Peter Eppinger (Contact Author)

University of Tuebingen ( email )

Gabriel J. Felbermayr

Kiel Institute for the World Economy ( email )

P.O. Box 4309
Kiel, Schleswig-Hosltein D-24100
Germany

Oliver Krebs

University of Würzburg ( email )

Sanderring 2
Würzburg, D-97070
Germany

Bohdan Kukharskyy

City University of New York (CUNY) ( email )

695 Park Avenue
New York, NY 10021
United States

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