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Global supply chains: Why they emerged, why they matter, and where they are going

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  • Baldwin, Richard

Abstract

Global supply chains (GSCs) are transforming the world. This paper explores why they emerged, why they are significant and future directions they are likely to take along with some implications for policy. After putting global supply chains into an historical perspective, the paper presents an economic framework for understanding the functional and geographical unbundling of production. The fundamental trade off in supply chain fractionalisation is between specialisation gains and coordination costs. The key trade-off in supply chain dispersion is between dispersion and agglomeration forces. Supply-chain trade should be not viewed as standard trade in parts and components rather than final goods. Production sharing has linked cross-border flows of goods, investment, services, know-how and people in novel ways. The paper suggest that future of global supply chains will be influenced by: 1) improvements in coordination technology that lowers the cost of functional and geographical unbundling, 2) improvements in computer integrated manufacturing that lowers the benefits of specialisation and shifts stages toward greater skill-, capital, and technology-intensity, 3) narrowing of wage gaps that reduces the benefit of North-South offshoring to nations like China, and 4) the price of oil that raises the cost of unbundling.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9103.

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Date of creation: Aug 2012
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Handle: RePEc:cpr:ceprdp:9103

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Keywords: global supply chains; globalisation; second unbundling;

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  1. Institutions of capitalism
    by Diane Coyle in The Enlightened Economist on 2013-04-02 06:05:21
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Cited by:
  1. Bernard Hoekman & Ben Shepherd, 2013. "Who Profits From Trade Facilitation Initiatives?," RSCAS Working Papers 2013/49, European University Institute.

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