Global Supply Chains in the Pandemic

Abstract

We study the role of global supply chains in the impact of the Covid-19 pandemic on GDP growth for 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. Using the quantitative framework and methods developed in Huo, Levchenko, and Pandalai-Nayar (2020), we show that the average real GDP downturn due to the Covid-19 shock is expected to be-29:6%, with one quarter of the total due to transmission through global supply chains. However, "renationalization" of global supply chains does not in general make countries more resilient to pandemic-induced contractions in labor supply. The average GDP drop would have been-30:2%in a world without trade in inputs and final goods. 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.

COVID-19 and Emerging Markets: A SIR Model, Demand Shocks and Capital Flows

“…Those sectors that are more closely connected to international value chains as well as those sectors that are dependent on external funding would be affected more from the global developments. Bonadio et al (2020) shows that a third of the output loss is due to global supply chains. Different from our framework where we have both supply and demand shocks, Bonadio et al (2020) only assume sectoral supply shocks.…”

“…Bonadio et al (2020) shows that a third of the output loss is due to global supply chains. Different from our framework where we have both supply and demand shocks, Bonadio et al (2020) only assume sectoral supply shocks. These shocks are caused by the fraction of workers not being able to work because of the measures adapted by the country.…”

“…We argue that, for an open economy, the effects are even bigger as lower external demand amplifies the domestic demand shock via sectoral I-O linkages. Most of the literature on global supply chains have similar amplification via I-O linkages but they focus on the role of sectoral supply shocks, not demand (See Barrot et al (2020), Bonadio et al (2020), and Baqaee et al (2020)). 4 We show that once the number of infections reach a certain threshold, demand stalls and remains rather sluggish so long as the infection numbers do not exhibit a substantial decline.…”

Working Remotely and the Supply-side Impact of Covid-19

“…Our goal is to isolate the former rather the latter channel. In this respect, our work is closer to Bonadio, Huo, Levchenko, and Pandalai-Nayar (2020) who focus on the role of global supply chains; or Hassan, Hollander, van Lent, and Tahoun (2020) who identify differences in firms' exposure based on the transcript of analyst calls.…”

Nonlinear Production Networks with an Application to the COVID-19 Crisis

“…Once again, our approach differs since we focus on positive rather than normative questions. Bonadio et al (2020) analyze the effects of in an open-economy context.…”