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Global Supply Chains in the Pandemic

Author

Listed:
  • BarthŽlŽmy Bonadio

    (University of Michigan)

  • Zhen Huo

    (Yale University)

  • Andrei A. Levchenko

    (University of Michigan, NBER, & CEPR)

  • Nitya Pandalai-Nayar

    (University of Texas, Austin. & NBER)

Abstract

We study the role of global supply chains in the impact of the Covid-19 pandemic on GDP growth using a multi-sector quantitative framework implemented on 64 countries. We discipline the labor supply shock across sectors and countries using the fraction of work in the sector that can be done from home, interacted with the stringency with which countries imposed lockdown measures. One quarter of the total model-implied real GDP decline is due to transmission through global supply chains. However, ÒrenationalizationÓ of global supply chains does not in general make countries more resilient to pandemic-induced contractions in labor supply. This is because eliminating reliance on foreign inputs increases reliance on the domestic inputs, which are also disrupted due to nationwide lockdowns. In fact, trade can insulate a country imposing a stringent lockdown from the pandemic-shock, as its foreign inputs are less disrupted than its domestic ones. Finally, unilateral lifting of the lockdowns in the largest economies can contribute as much as 2.5% to GDP growth in some of their smaller trade partners.

Suggested Citation

  • BarthŽlŽmy Bonadio & Zhen Huo & Andrei A. Levchenko & Nitya Pandalai-Nayar, 2021. "Global Supply Chains in the Pandemic," Working Papers 683, Research Seminar in International Economics, University of Michigan.
  • Handle: RePEc:mie:wpaper:683
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    More about this item

    Keywords

    production networks; international transmission; pandemic; Covid-19;
    All these keywords.

    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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