The Resilience of Global Value Chains during the Covid-19 pandemic: the case of Italy

This paper shows that, contrary to what could be expected on the basis of past crises, during the current Covid-19 pandemic, Global Value Chains (GVCs) may have sheltered countries and firms, contributing to their resilience. Using the newly released Asian Development Bank input-output table for 2019, we provide some evidence showing that countries more integrated into international production suffered lower GDP losses. Position along the GVCs and timing affect the result: “upstream†inputs supplying countries were more “protected†, but the sheltering effect took time to materialize. It is in the second wave of the Covid-19 pandemic (after the summer) that high GVC participation countries performed better and experienced a more pronounced rebound relative to less integrated countries. Similar results hold also at the firm level. Exploiting Italian firms’ World Bank Enterprise Surveys for 2019, 2020 (June) and 2020 (December), we show that the reduction in sales is lower for internationalized firms and for more complex modes of internationalization. Consistently with the macro-level evidence, the results about the impacts on firms are further reinforced in the second wave. These findings suggest that the Covid-19 shock, despite having hit the world economy harder than the Great Financial Crisis, might impact less the globalization patterns, as international firms seem to be more resilient than their domestic counterparts.