Trade Disruptions and Reshoring
72 Pages Posted: 29 Jun 2021 Last revised: 21 Oct 2022
Date Written: June 17, 2021
Can temporary trade disruptions lead to a persistent change in plant sales and input sourcing locations? Using plant level administrative data, we show that COVID-19 induced shutdown in March 2020 led to a collapse in domestic trade across states in India, which strikingly continued even after the movement restrictions across state borders were removed. We show that the reshoring channel explains this phenomenon as plants more dependent on inter-state sales (inputs) shift from inter- to intra-state sales (input-sourcing). The extent of reshoring is captured by a novel measure, Scope for Home Expansion, that combines both demand and supply side constraints for a given product at the state level. This channel quantitatively accounts for 7.6 percent of the sales growth in the last quarter of 2020.
Keywords: Domestic trade, Reshoring, Scope for Home Expansion, Trade collapse
JEL Classification: F14, E32, L23, L6
Suggested Citation: Suggested Citation