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Global production network, technology spillover, and shock transmission

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  • Weilin Liu
  • Qian Cheng

Abstract

This study presents a new method to analyse the impact of exogenous shock and its transmission mechanism within the global production network, based on scenarios of the COVID-19 pandemic. We decompose domestic and international technology spillovers and introduce them into an economic growth model to investigate the elasticities of factor inputs and knowledge spillovers through industrial linkages, and eventually estimate a model with spatial specifications. The results from the scenario simulations suggest that the global total output is projected to fall by 3.60% and 8.41% under the V-shaped and L-shaped recovery scenarios, respectively, and that the propagation through input-output linkages is an important channel that causes global economic fluctuations. Economies at the hub of the production network, that is, the United States, China, and Germany, are the most seriously affected. Structural decomposition analysis results indicate that the shortage of intermediate inputs supply is the main driver of output decline, followed by the blockage of technology diffusion, and lastly, the reduction of labour supply.

Suggested Citation

  • Weilin Liu & Qian Cheng, 2021. "Global production network, technology spillover, and shock transmission," Applied Economics, Taylor & Francis Journals, vol. 53(60), pages 7020-7036, December.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:60:p:7020-7036
    DOI: 10.1080/00036846.2021.1958140
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    Cited by:

    1. André Carrascal & Luis Orea, "undated". "TFP growth, embeddedness, and Covid-19: a novel production model that allows estimating trade elasticities," Working Papers 6, International Society for Efficiency and Productivity Analysis.

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