KCG Lunch-time Seminar

Decoupling Global Value Chains — Peter Eppinger

16 Apr 2021

12:00
-
13:00
Institut für Weltwirtschaft

Speaker

Peter Eppinger (University of Tübingen)

Abstract

The supply chain contagion sparked by the Covid-19 pandemic has brought an important question to the forefront of the policy debate: Can cutting global value chains (GVCs) benefit a country by shielding it from foreign shocks? Using a quantitative trade model we find that shutting down GVCs causes substantial welfare losses in all countries. In this counterfactual world without GVCs, the international repercussions of a Covid-19 shock in China are reduced on average, but magnified in some countries. A unilateral repatriation of all GVCs by the U.S. would reduce national welfare by 1.6% but barely change U.S. exposure to a foreign shock. More generally, we find across a wide range of scenarios that the reduction in shock exposure due to decoupling does not compensate the direct welfare costs.

Authors

Peter Eppinger (University of Tübingen) — Gabriel Felbermayr (Kiel Institute) — Oliver Krebs (University of Tübingen) — Bohdan Kukharskyy (City University of New York)

Room

Virtually via Zoom
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