Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/224061 
Year of Publication: 
2020
Series/Report no.: 
Kiel Working Paper No. 2167
Publisher: 
Kiel Institute for the World Economy (IfW), Kiel
Abstract: 
In early 2020, the disease Covid-19 caused a drastic lockdown of the Chinese economy. We use a quantitative trade model with input-output linkages to gauge the effects of this adverse supply shock in China on the global economy through international trade and global value chains (GVCs). We find moderate welfare losses in most countries outside of China, while a few countries even gain from the shock due to trade diversion. As a key methodological contribution, we quantify the role of GVCs (in contrast to final goods trade) in transmittingthe shock. In a hypothetical world without GVCs, the welfare loss due to the Covid-19 shock in China is reduced by 40% in the median country. In several other countries, the effects aremagnified or reversed for several countries. Had the U.S. unilaterally repatriated GVCs, the country would have incurred a substantial welfare loss while its exposure to the shock would have barely changed.
Subjects: 
Covid-19
quantitative trade model
input-output linkages
global value chains
supply chain contagion
shock transmission
JEL: 
F11
F12
F14
F17
F62
Document Type: 
Working Paper

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