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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
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    References listed on IDEAS

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    1. Barthélémy Bonadio & Zhen Huo & Andrei A. Levchenko & Nitya Pandalai-Nayar, 2020. "Global Supply Chains in the Pandemic," NBER Working Papers 27224, National Bureau of Economic Research, Inc.
    2. Liu, Xuepeng & Ornelas, Emanuel & Shi, Huimin, 2021. "The Trade Impact of the Covid-19 Pandemic," CEPR Discussion Papers 16201, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    quantitative trade model; input-output linkages; global value chains; Covid-19; supply chain contagion; shock transmission;
    All these 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

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