IDEAS home Printed from https://ideas.repec.org/p/rif/wpaper/109.html

Shock Infections through Global Value Chains

Author

Listed:
  • Kuusi, Tero
  • Ali-Yrkkö, Jyrki

Abstract

We examine how the Covid-19 shock was transmitted from the foreign, upstream parts of value chains to domestic (downstream) production. After categorizing global value chains based on their home-producer industry and country, we quantify the multiplier effect of the transmitted shock on the entire value chain by considering changes in home production. We focus on the value-chain impact of the early stages of Covid-19 in China (1-4/2020) and measure the upstream (direct) shock using world input-output and Chinese production data. Our differences-in-differences research setup reveals that the shock impact was large: For every percentage point share of value added contributed by the Chinese producers to the value chain, there was a 1.3 percentage point larger contraction in home production. Furthermore, the multiplier effect stemming from the contraction in Chinese manufacturing substantially magnified the initial shock, increasing its impact on domestic production by an order of magnitude. The effects varied across industries and regions, with the most substantial multiplier effects observed in highly digitalized, high-R&D industries, particularly in the EU and North America. Furthermore, we provide evidence on the dynamics of adjustment.

Suggested Citation

  • Kuusi, Tero & Ali-Yrkkö, Jyrki, 2023. "Shock Infections through Global Value Chains," ETLA Working Papers 109, The Research Institute of the Finnish Economy.
    • Handle: RePEc:rif:wpaper:109
    as

    Download full text from publisher

    File URL: https://www.etla.fi/wp-content/uploads/ETLA-Working-Papers-109.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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).
    2. Kleibergen, Frank & Paap, Richard, 2006. "Generalized reduced rank tests using the singular value decomposition," Journal of Econometrics, Elsevier, vol. 133(1), pages 97-126, July.
    3. Matthew Elliott & Benjamin Golub & Matthew V. Leduc, 2022. "Supply Network Formation and Fragility," American Economic Review, American Economic Association, vol. 112(8), pages 2701-2747, August.
    4. Marcel Timmer, 2017. "Productivity Measurement in Global Value Chains," International Productivity Monitor, Centre for the Study of Living Standards, vol. 33, pages 182-193, Fall.
    5. Acemoglu, Daron & Tahbaz-Salehi, Alireza, 2020. "Firms, Failures, and Fluctuations: The Macroeconomics of Supply Chain Disruptions," CEPR Discussion Papers 15074, C.E.P.R. Discussion Papers.
    6. Li, Yuhong & Chen, Kedong & Collignon, Stephane & Ivanov, Dmitry, 2021. "Ripple effect in the supply chain network: Forward and backward disruption propagation, network health and firm vulnerability," European Journal of Operational Research, Elsevier, vol. 291(3), pages 1117-1131.
    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. Kuusi, Tero & Lähdemäki, Sakari, 2025. "Growth in Chains: EU Value Chain Productivity and its Slowdown," ETLA Working Papers 128, The Research Institute of the Finnish Economy.
    2. Raphael Lafrogne-Joussier & Julien Martin & Isabelle Mejean, 2023. "Supply Shocks in Supply Chains: Evidence from the Early Lockdown in China," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(1), pages 170-215, March.
    3. Cajal-Grossi, Julia & Del Prete, Davide & Macchiavello, Rocco, 2023. "Supply chain disruptions and sourcing strategies," International Journal of Industrial Organization, Elsevier, vol. 90(C).
    4. Shah, Sayar Ahmad & Garg, Bhavesh, 2023. "Testing policy effectiveness during COVID-19: An NK-DSGE analysis," Journal of Asian Economics, Elsevier, vol. 84(C).
    5. Peter Eppinger & Gabriel J. Felbermayr & Oliver Krebs & Bohdan Kukharskyy, 2020. "Covid-19 Shocking Global Value Chains," CESifo Working Paper Series 8572, CESifo.
    6. Heiwai Tang & Xiuxiu Zheng, 2024. "How did China's zero Covid policy affect its exports?," Review of International Economics, Wiley Blackwell, vol. 32(2), pages 545-573, May.
    7. Chen, Jun & Elliott, Matthew & Koh, Andrew, 2023. "Capability accumulation and conglomeratization in the information age," Journal of Economic Theory, Elsevier, vol. 210(C).
    8. Kazunobu Hayakawa & Hiroshi Mukunoki, 2021. "Impacts of COVID‐19 on Global Value Chains," The Developing Economies, Institute of Developing Economies, vol. 59(2), pages 154-177, June.
    9. Ersahin, Nuri & Giannetti, Mariassunta & Huang, Ruidi, 2024. "Supply chain risk: Changes in supplier composition and vertical integration," Journal of International Economics, Elsevier, vol. 147(C).
    10. Agostino Capponi & Chuan Du & Joseph E. Stiglitz, 2024. "Are Supply Networks Efficiently Resilient?," NBER Working Papers 32221, National Bureau of Economic Research, Inc.
    11. Peter Eppinger & Gabriel J. Felbermayr & Oliver Krebs & Bohdan Kukharskyy, 2021. "Decoupling Global Value Chains," CESifo Working Paper Series 9079, CESifo.
    12. Degl’Innocenti, Marta & Santilli, Gianluca & Sclip, Alex & Zhou, Si, 2025. "Commodity price risk, supply chain, and lending," Energy Economics, Elsevier, vol. 150(C).
    13. Crosignani, Matteo & Han, Lina & Macchiavelli, Marco & Silva, André F., 2026. "Securing technological leadership? The cost of export controls on firms," Journal of Financial Economics, Elsevier, vol. 175(C).
    14. Richard Baldwin & Rebecca Freeman & Angelos Theodorakopoulos, 2023. "Hidden Exposure: Measuring US Supply Chain Reliance," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 54(2 (Fall)), pages 79-167.
    15. Márta Bisztray & Gábor Békés & Alexandros Charos & Klaus Friesenbichler & Miklós Koren & Agnes Kügler & Balázs Lengyel & Amanda De Pirro & Birgit Meyer, 2025. "The Supply Chain Disruption Survey: A New Survey on Knowledge Flows in Global Supply Chains," WIFO Working Papers 716, WIFO.
    16. Luo, Changyuan & Wang, Ning, 2025. "U.S.-China trade frictions and supply chain reconstruction: Perspective from indirect links," Journal of International Money and Finance, Elsevier, vol. 151(C).
    17. Junji Kageyama, 2009. "Happiness and sex difference in life expectancy," MPIDR Working Papers WP-2009-009, Max Planck Institute for Demographic Research, Rostock, Germany.
    18. Nicola Campigotto & Chiara Rapallini & Aldo Rustichini, 2022. "School friendship networks, homophily and multiculturalism: evidence from European countries," Journal of Population Economics, Springer;European Society for Population Economics, vol. 35(4), pages 1687-1722, October.
    19. Leanora Alecia Brown & Jorge Martinez-Vazquez, 2015. "International Debt Forgiveness: Who Gets Picked and Its Effect On The Tax Effort Of Developing Countries," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1504, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    20. Rockey, James, 2012. "Reconsidering the fiscal effects of constitutions," European Journal of Political Economy, Elsevier, vol. 28(3), pages 313-323.

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

    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:rif:wpaper:109. 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: Kaija Hyvönen-Rajecki (email available below). General contact details of provider: https://edirc.repec.org/data/etlaafi.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.