Industry Returns in Global Value Chains: The Role of Upstreamness and Downstreamness

Branger, Nicole; Flacke, René Marian; Windmüller, Steffen

doi:10.2139/ssrn.3476690

Cited by 6 publications

(11 citation statements)

References 44 publications

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“…The difference between the downstream and upstream effects of lockdown is aggravated as the effect propagates further through supply chains. This finding is in line with the literature [36,43] that also finds the upstream accumulation of negative effects on profits and assets. In practice, our result implies that a region with many small-and medium-sized suppliers of simple materials and parts should be cautious about whether it lifts its lockdown, which may not result in a large economic benefit but could still promote the spread of COVID-19.…”

Section: Discussionsupporting

confidence: 93%

“…However, the effect of upstream and downstream links can differ in size. A recent sectoral analysis [36] finds that the profits of more upstream sectors in global value chains are substantially lower than those of more downstream sectors, implying that negative economic shocks propagate upstream more than downstream. To clarify the possible effect of upstreamness, we define the upstream position of each firm i in supply chains by its Helmholtz-Hodge (HH) potential, φ i computed from the HHD.…”

Section: Lifting Lockdown In Only One Regionmentioning

confidence: 99%

“…In Fig 2, the blue lines indicate the results of the 30 Monte Carlo runs conducted to estimate the effect of the actual lockdown in Japan given the sector-specific rates of reduction in production capacity assumed in the literature [9,36] and shown in S1 Table . The horizontal axis indicates the number of days since the declaration of the state of emergency (7 April) and the vertical axis represents the total value added production, or GDP, of Japan on each day. See Section 3.2 for the sequence of the state of emergency across the country.…”

Section: Simulation Of the Effect Of The Actual Lockdownmentioning

confidence: 99%

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Do economic effects of the anti-COVID-19 lockdowns in different regions interact through supply chains?

2021

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To prevent the spread of COVID-19, many cities, states, and countries have ‘locked down’, restricting economic activities in non-essential sectors. Such lockdowns have substantially shrunk production in most countries. This study examines how the economic effects of lockdowns in different regions interact through supply chains, which are a network of firms for production, by simulating an agent-based model of production using supply-chain data for 1.6 million firms in Japan. We further investigate how the complex network structure affects the interactions between lockdown regions, emphasising the role of upstreamness and loops by decomposing supply-chain flows into potential and circular flow components. We find that a region’s upstreamness, intensity of loops, and supplier substitutability in supply chains with other regions largely determine the economic effect of the lockdown in the region. In particular, when a region lifts its lockdown, its economic recovery substantially varies depending on whether it lifts the lockdown alone or together with another region closely linked through supply chains. These results indicate that the economic effect produced by exogenous shocks in a region can affect other regions and therefore this study proposes the need for inter-region policy coordination to reduce economic loss due to lockdowns.

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Section: Discussionsupporting

confidence: 93%

Section: Lifting Lockdown In Only One Regionmentioning

confidence: 99%

Section: Simulation Of the Effect Of The Actual Lockdownmentioning

confidence: 99%

See 1 more Smart Citation

Do economic effects of the anti-COVID-19 lockdowns in different regions interact through supply chains?

2021

View full text Add to dashboard Cite

show abstract

“…However, the effect of upstream and downstream links can differ in size. A recent sectoral analysis [33] finds that the profits of more upstream sectors in global value chains are substantially lower than those of more downstream sectors, implying that negative economic shocks propagate upstream more than downstream. To clarify the possible effect of upstreamness, we define the upstream position of each firm i in supply chains using its Helmholtz-Hodge potential, φ i , computed from the potential flows obtained from the HHD for the whole network.…”

Section: Simulation Proceduresmentioning

confidence: 99%

“…In Figure 2, the blue lines show the results of the 30 Monte Carlo runs conducted to estimate the effect of the actual lockdown in Japan given the sector-specific rates of reduction in production capacity assumed in the literature [33,9] and shown in Appendix B.1. The horizontal axis indicates the number of days since the declaration of the state of emergency (April 7) and the vertical axis represents the total value added production, or GDP, of Japan on each day.…”

Section: Simulation Of the Effect Of The Actual Lockdownmentioning

confidence: 99%