Global supply chains: Why they emerged, why they matter, and where they are going
AbstractGlobal 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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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9103.
Date of creation: Aug 2012
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Find related papers by JEL classification:
- F1 - International Economics - - Trade
- F2 - International Economics - - International Factor Movements and International Business
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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- Kalina Manova & Zhihong Yu, 2012. "Firms and Credit Constraints along the Global Value Chain: Processing Trade in China," NBER Working Papers 18561, National Bureau of Economic Research, Inc.
- Bernard Hoekman & Ben Shepherd, 2013.
"Who Profits From Trade Facilitation Initiatives?,"
RSCAS Working Papers
2013/49, European University Institute.
- Anderson, Kym & Strutt, Anna, 2014. "Impacts of Asia’s Rise on African and Latin American Trade: Projections to 2030," 2014 Conference (58th), February 4-7, 2014, Port Maquarie, Australia 165805, Australian Agricultural and Resource Economics Society.
- Stracca, Livio, 2013. "The rise of China and India: blessing or curse for the advanced countries?," Working Paper Series 1620, European Central Bank.
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