IDEAS home Printed from https://ideas.repec.org/p/ces/ceswps/_9079.html

Decoupling Global Value Chains

Author

Listed:
  • Peter Eppinger
  • Gabriel J. Felbermayr
  • Oliver Krebs
  • Bohdan Kukharskyy

Abstract

Recent disruptions to global value chains (GVCs) have raised an important question: Can decoupling from GVCs increase a country’s welfare by reducing its exposure to foreign supply shocks? We use a quantitative trade model to simulate GVCs decoupling, defined as increased barriers to global input trade. After decoupling, the repercussions of foreign supply shocks are reduced on average, but some countries experience magnified effects. Across various scenarios, welfare losses from decoupling far exceed any benefits from lower shock exposure. In the U.S., a repatriation of GVCs would reduce national welfare by 2.2% but barely change U.S. exposure to foreign shocks.

Suggested Citation

  • Peter Eppinger & Gabriel J. Felbermayr & Oliver Krebs & Bohdan Kukharskyy, 2021. "Decoupling Global Value Chains," CESifo Working Paper Series 9079, CESifo.
    • Handle: RePEc:ces:ceswps:_9079
    as

    Download full text from publisher

    File URL: https://www.ifo.de/DocDL/cesifo1_wp9079.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Luca Fornaro & Martin Wolf, 2020. "Covid-19 coronavirus and macroeconomic policy," Economics Working Papers 1713, Department of Economics and Business, Universitat Pompeu Fabra.
    2. Martin Bodenstein & Giancarlo Corsetti & Luca Guerrieri, 2022. "Social distancing and supply disruptions in a pandemic," Quantitative Economics, Econometric Society, vol. 13(2), pages 681-721, May.
    3. Emily J. Blanchard & Chad P. Bown & Robert C. Johnson, 2016. "Global Supply Chains and Trade Policy," NBER Working Papers 21883, National Bureau of Economic Research, Inc.
    4. Daron Acemoglu & Vasco M. Carvalho & Asuman Ozdaglar & Alireza Tahbaz‐Salehi, 2012. "The Network Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 80(5), pages 1977-2016, September.
    5. Daron Acemoglu & Alireza Tahbaz-Salehi, 2020. "Firms, Failures, and Fluctuations: The Macroeconomics of Supply Chain Disruptions," NBER Working Papers 27565, National Bureau of Economic Research, Inc.
    6. Jonathan Eaton & Robert Dekle & Samuel Kortum, 2007. "Unbalanced Trade," American Economic Review, American Economic Association, vol. 97(2), pages 351-355, May.
    7. Vasco M Carvalho & Makoto Nirei & Yukiko U Saito & Alireza Tahbaz-Salehi, 0. "Supply Chain Disruptions: Evidence from the Great East Japan Earthquake," The Quarterly Journal of Economics, Oxford University Press, vol. 136(2), pages 1255-1321.
    8. Martin S Eichenbaum & Sergio Rebelo & Mathias Trabandt, 2021. "The Macroeconomics of Epidemics [Economic activity and the spread of viral diseases: Evidence from high frequency data]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5149-5187.
    9. Bonadio, Barthélémy & Huo, Zhen & Levchenko, Andrei A. & Pandalai-Nayar, Nitya, 2021. "Global supply chains in the pandemic," Journal of International Economics, Elsevier, vol. 133(C).
    10. Alessandro Sforza & Marina Steininger, 2020. "Globalization in the Time of Covid-19," CESifo Working Paper Series 8184, CESifo.
    11. Luca Fornaro & Martin Wolf, 2020. "Covid-19 Coronavirus and Macroeconomic Policy," Working Papers 1168, Barcelona School of Economics.
    12. Burstein, Ariel & Kurz, Christopher & Tesar, Linda, 2008. "Trade, production sharing, and the international transmission of business cycles," Journal of Monetary Economics, Elsevier, vol. 55(4), pages 775-795, May.
    13. Zhen Huo & Andrei A Levchenko & Nitya Pandalai-Nayar, 2025. "International Comovement in the Global Production Network," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 92(1), pages 365-403.
    14. Rita Cappariello & Sebastian Franco-Bedoya & Vanessa Gunnella & Gianmarco I. P. Ottaviano, 2020. "Rising protectionism and global value chains: quantifying the general equilibrium effects," CEP Discussion Papers dp1682, Centre for Economic Performance, LSE.
    15. Benny Kleinman & Ernest Liu & Stephen J. Redding, 2024. "International Friends and Enemies," American Economic Journal: Macroeconomics, American Economic Association, vol. 16(4), pages 350-385, October.
    16. Costinot, Arnaud & Rodríguez-Clare, Andrés, 2014. "Trade Theory with Numbers: Quantifying the Consequences of Globalization," Handbook of International Economics, in: Gopinath, G. & Helpman, . & Rogoff, K. (ed.), Handbook of International Economics, edition 1, volume 4, chapter 0, pages 197-261, Elsevier.
    17. Jean-Noël Barrot & Julien Sauvagnat, 2016. "Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(3), pages 1543-1592.
    18. Veronica Guerrieri & Guido Lorenzoni & Ludwig Straub & Iván Werning, 2022. "Macroeconomic Implications of COVID-19: Can Negative Supply Shocks Cause Demand Shortages?," American Economic Review, American Economic Association, vol. 112(5), pages 1437-1474, May.
    19. Farhi, Emmanuel & Baqaee, David Rezza, 2020. "Nonlinear Production Networks with an Application to the Covid-19 Crisis," CEPR Discussion Papers 14742, C.E.P.R. Discussion Papers.
    20. Vasco M. Carvalho & Alireza Tahbaz-Salehi, 2019. "Production Networks: A Primer," Annual Review of Economics, Annual Reviews, vol. 11(1), pages 635-663, August.
    21. Pol Antràs & Stephen J. Redding & Esteban Rossi-Hansberg, 2023. "Globalization and Pandemics," American Economic Review, American Economic Association, vol. 113(4), pages 939-981, April.
    22. Julian di Giovanni & Andrei A. Levchenko, 2010. "Putting the Parts Together: Trade, Vertical Linkages, and Business Cycle Comovement," American Economic Journal: Macroeconomics, American Economic Association, vol. 2(2), pages 95-124, April.
    23. Robert C. Johnson, 2014. "Trade in Intermediate Inputs and Business Cycle Comovement," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(4), pages 39-83, October.
    24. Hsieh, Chang-Tai & Ossa, Ralph, 2016. "A global view of productivity growth in China," Journal of International Economics, Elsevier, vol. 102(C), pages 209-224.
    25. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    26. Felbermayr, Gabriel & Gröschl, Jasmin & Heiland, Inga, 2022. "Complex Europe: Quantifying the cost of disintegration," Journal of International Economics, Elsevier, vol. 138(C).
    27. Hylke Vandenbussche & William Connell & Wouter Simons, 2022. "Global value chains, trade shocks and jobs: An application to Brexit," The World Economy, Wiley Blackwell, vol. 45(8), pages 2338-2369, August.
    28. Mary E. Lovely & Yang Liang, 2018. "Trump Tariffs Primarily Hit Multinational Supply Chains, Harm US Technology Competitiveness," Policy Briefs PB18-12, Peterson Institute for International Economics.
    29. Fernando Leibovici & Ana Maria Santacreu, 2020. "Shortages of Critical Goods in a Global Economy: Optimal Trade and Industrial Policy," Working Papers 2020-010, Federal Reserve Bank of St. Louis, revised 20 Jun 2025.
    30. Gene M. Grossman & Elhanan Helpman, 2021. "When Tariffs Disrupt Global Supply Chains," Working Papers 2021-73, Princeton University. Economics Department..
    31. Shaowen Luo & Kwok Ping Tsang, 2020. "China And World Output Impact Of The Hubei Lockdown During The Coronavirus Outbreak," Contemporary Economic Policy, Western Economic Association International, vol. 38(4), pages 583-592, October.
    32. Lorenzo Caliendo & Maximiliano Dvorkin & Fernando Parro, 2019. "Trade and Labor Market Dynamics: General Equilibrium Analysis of the China Trade Shock," Econometrica, Econometric Society, vol. 87(3), pages 741-835, May.
    33. Gopinath, G. & Helpman, . & Rogoff, K. (ed.), 2014. "Handbook of International Economics," Handbook of International Economics, Elsevier, edition 1, volume 4, number 4.
    34. Meier, Matthias & Pinto, Eugenio, 2024. "COVID-19 Supply Chain Disruptions," European Economic Review, Elsevier, vol. 162(C).
    35. Julian di Giovanni & Andrei A. Levchenko & Jing Zhang, 2014. "The Global Welfare Impact of China: Trade Integration and Technological Change," American Economic Journal: Macroeconomics, American Economic Association, vol. 6(3), pages 153-183, July.
    36. David Lagakos & Michael E. Waugh, 2013. "Selection, Agriculture, and Cross-Country Productivity Differences," American Economic Review, American Economic Association, vol. 103(2), pages 948-980, April.
    37. Rudolfs Bems & Robert C Johnson & Kei-Mu Yi, 2010. "Demand Spillovers and the Collapse of Trade in the Global Recession," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 58(2), pages 295-326, December.
    38. A. Craig MacKinlay, 1997. "Event Studies in Economics and Finance," Journal of Economic Literature, American Economic Association, vol. 35(1), pages 13-39, March.
    39. Christoph E. Boehm & Aaron Flaaen & Nitya Pandalai-Nayar, 2019. "Input Linkages and the Transmission of Shocks: Firm-Level Evidence from the 2011 Tōhoku Earthquake," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 60-75, March.
    40. Robert Dekle & Jonathan Eaton & Samuel Kortum, 2008. "Global Rebalancing with Gravity: Measuring the Burden of Adjustment," IMF Staff Papers, Palgrave Macmillan, vol. 55(3), pages 511-540, July.
    41. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    42. A. D. Roy, 1951. "Some Thoughts On The Distribution Of Earnings," Oxford Economic Papers, Oxford University Press, vol. 3(2), pages 135-146.
    43. Cuñat, Alejandro & Zymek, Robert, 2022. "The (structural) gravity of epidemics," European Economic Review, Elsevier, vol. 144(C).
    44. Jean-Noël Barrot & Basile Grassi & Julien Sauvagnat, 2021. "Sectoral Effects of Social Distancing," AEA Papers and Proceedings, American Economic Association, vol. 111, pages 277-281, May.
    45. Lorenzo Caliendo & Fernando Parro, 2015. "Estimates of the Trade and Welfare Effects of NAFTA," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 82(1), pages 1-44.
    46. Ahmad Lashkaripour & Mostafa Beshkar, 2020. "The Cost of Dissolving the WTO: The Role of Global Value Chains," CAEPR Working Papers 2020-005 Classification-, Center for Applied Economics and Policy Research, Department of Economics, Indiana University Bloomington.
    47. Hiroyasu Inoue & Yasuyuki Todo, 2020. "The propagation of the economic impact through supply chains: The case of a mega-city lockdown against the spread of COVID-19," Papers 2003.14002, arXiv.org.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Eppinger, Peter S. & Felbermayr, Gabriel & Krebs, Oliver & Kukharskyy, Bohdan, 2020. "Covid-19 shocking global value chains," Kiel Working Papers 2167, Kiel Institute for the World Economy.
    2. Bonadio, Barthélémy & Huo, Zhen & Levchenko, Andrei A. & Pandalai-Nayar, Nitya, 2021. "Global supply chains in the pandemic," Journal of International Economics, Elsevier, vol. 133(C).
    3. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    4. Julian di Giovanni & Andrei A. Levchenko & Isabelle Mejean, 2024. "Foreign Shocks as Granular Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 391-433.
    5. Meier, Matthias & Pinto, Eugenio, 2024. "COVID-19 Supply Chain Disruptions," European Economic Review, Elsevier, vol. 162(C).
    6. Antoine Mandel & Vipin Veetil, 2020. "The Economic Cost of COVID Lockdowns: An Out-of-Equilibrium Analysis," Economics of Disasters and Climate Change, Springer, vol. 4(3), pages 431-451, October.
    7. Qianxue Zhang, 2022. "The Hubei lockdown and its global impacts via supply chains," Review of International Economics, Wiley Blackwell, vol. 30(4), pages 1087-1109, September.
    8. Everett Grant & Julieta Yung, 2019. "Upstream, Downstream & Common Firm Shocks," Globalization Institute Working Papers 360, Federal Reserve Bank of Dallas.
    9. Alonso de Gortari, 2018. "Disentangling Global Value Chains," 2018 Meeting Papers 139, Society for Economic Dynamics.
    10. Julian Di Giovanni & Galina Hale, 2022. "Stock Market Spillovers via the Global Production Network: Transmission of U.S. Monetary Policy," Journal of Finance, American Finance Association, vol. 77(6), pages 3373-3421, December.
    11. Fan, Haichao & Gao, Xiang & Zhang, Lina, 2021. "How China's accession to the WTO affects global welfare?," China Economic Review, Elsevier, vol. 69(C).
    12. Marc Bacchetta & Eddy Bekkers & Roberta Piermartini & Stela Rubinova & Victor Stolzenburg & Ankai Xu, 2024. "COVID‐19 and global value chains: A discussion of arguments on value chain organisation and the role of the WTO," The World Economy, Wiley Blackwell, vol. 47(9), pages 3709-3746, September.
    13. Alessandro Sforza & Marina Steininger, 2020. "Globalization in the Time of Covid-19," CESifo Working Paper Series 8184, CESifo.
    14. Lee, Dongyeol, 2021. "Propagation of economic shocks through vertical and trade linkages in Korea: An empirical analysis," Japan and the World Economy, Elsevier, vol. 60(C).
    15. Inga Heiland, 2017. "Five Essays on International Trade, Factor Flows and the Gains from Globalization," ifo Beiträge zur Wirtschaftsforschung, ifo Institute - Leibniz Institute for Economic Research at the University of Munich, number 74, July.
    16. Das, Sonali & Magistretti, Giacomo & Pugacheva, Evgenia & Wingender, Philippe, 2022. "Sectoral spillovers across space and time," Journal of Macroeconomics, Elsevier, vol. 72(C).
    17. Gaurav Khanna & Nicolas Morales & Nitya Pandalai-Nayar, 2022. "Supply Chain Resilience: Evidence from Indian Firms," NBER Working Papers 30689, National Bureau of Economic Research, Inc.
    18. David Baqaee & Emmanuel Farhi, 2022. "Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis," American Economic Review, American Economic Association, vol. 112(5), pages 1397-1436, May.
    19. Dainauskas, Justas, 2024. "The network origins of trade comovement," Journal of International Economics, Elsevier, vol. 152(C).
    20. Farhi, Emmanuel & Baqaee, David Rezza, 2020. "Nonlinear Production Networks with an Application to the Covid-19 Crisis," CEPR Discussion Papers 14742, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ces:ceswps:_9079. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Klaus Wohlrabe (email available below). General contact details of provider: https://edirc.repec.org/data/cesifde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.