Decoupling Global Value Chains

45 Pages Posted: 18 May 2021

See all articles by Peter Eppinger

Peter Eppinger

University of Tuebingen

Gabriel J. Felbermayr

University of Kiel

Oliver Krebs

University of Würzburg

Bohdan Kukharskyy

City University of New York (CUNY)

Date Written: 2021

Abstract

Recent disruptions to global value chains (GVCs) have raised an important question: Can decoupling from GVCs increase a country’s welfare by reducing its exposure to foreign supply shocks? We use a quantitative trade model to simulate GVCs decoupling, defined as increased barriers to global input trade. After decoupling, the repercussions of foreign supply shocks are reduced on average, but some countries experience magnified effects. Across various scenarios, welfare losses from decoupling far exceed any benefits from lower shock exposure. In the U.S., a repatriation of GVCs would reduce national welfare by 2.2% but barely change U.S. exposure to foreign shocks

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

Suggested Citation

Eppinger, Peter and Felbermayr, Gabriel J. and Krebs, Oliver and Kukharskyy, Bohdan, Decoupling Global Value Chains (2021). CESifo Working Paper No. 9079, Available at SSRN: https://ssrn.com/abstract=3848341

Peter Eppinger (Contact Author)

University of Tuebingen ( email )

Gabriel J. Felbermayr

University of Kiel ( email )

Olshausenstr. 40
D-24118 Kiel, Schleswig-Holstein 24118
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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