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Policies to strengthen the resilience of global value chains: Empirical evidence from the COVID-19 shock

Author

Listed:
  • Cyrille Schwellnus
  • Antton Haramboure
  • Lea Samek

Abstract

Widespread supply disruptions in the wake of the COVID-19 pandemic and the Russian Federation’s large-scale aggression against Ukraine have raised concerns among policy makers that globalised value chains expose domestic production to shocks from abroad. This paper uses new indicators of global value chain dependencies and exogenous pandemic shocks to econometrically estimate the effects of supply disruptions abroad on domestic output. The results suggest that the adverse effects of supply disruptions are particularly large when concentration of supplying countries and supplying firms is high. Counterfactual simulations of the econometric model suggest that diversification of suppliers would have sizeable benefits in terms of shielding domestic production against country-specific supply shocks, with partial onshoring of production having only small additional benefits. Technological innovation that reduces foreign dependencies, such as the substitution of renewable energies for fossil fuels, can have similar benefits as diversification.

Suggested Citation

  • Cyrille Schwellnus & Antton Haramboure & Lea Samek, 2023. "Policies to strengthen the resilience of global value chains: Empirical evidence from the COVID-19 shock," OECD Science, Technology and Industry Policy Papers 141, OECD Publishing.
    • Handle: RePEc:oec:stiaac:141-en
    DOI: 10.1787/fd82abd4-en
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    Cited by:

    1. Kathrin Hofmann & Jürgen Janger & Fabian Unterlass, 2023. "Technologische Souveränität. Empirische Bestimmung und FTI-politische Implikationen," WIFO Studies, WIFO, number 70753, April.

    More about this item

    Keywords

    global value chains; international trade; resiliance;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F68 - International Economics - - Economic Impacts of Globalization - - - Policy
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods

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