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Vertical Linkages and the Collapse of Global Trade

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  • Rudolfs Bems
  • Robert C. Johnson
  • Kei-Mu Yi

Abstract

A common view is that cross-border vertical linkages played a key role in the 2008-2009 collapse of global trade. This paper presents two accounting results from a global input-output framework that shed light on this channel. We feed in observed changes in final demand and find that trade in final goods fell by twice as much as trade in intermediate goods. Nevertheless, intermediate goods account for more than two-fifths of the trade collapse. We also find that vertical specialization trade fell 13 percent, while value-added trade fell by 10 percent, because declines in demand were largest in highly vertically-specialized sectors.

Suggested Citation

  • Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2011. "Vertical Linkages and the Collapse of Global Trade," American Economic Review, American Economic Association, vol. 101(3), pages 308-312, May.
  • Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:308-12
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.101.3.308
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    1. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
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