Global supply chains in the pandemic.

Area of Science:

• Economics
• International Trade
• Pandemic Economics

Background:

• The Covid-19 pandemic caused unprecedented global economic disruption.
• Understanding the transmission channels of economic shocks is crucial for policy.
• Global supply chains are a key network for economic interdependence.

Purpose of the Study:

• To quantify the role of global supply chains in the Covid-19 pandemic's impact on GDP growth.
• To assess the effectiveness of supply chain "renationalization" in mitigating pandemic shocks.
• To analyze the impact of domestic lockdowns and international trade on economic resilience.

Main Methods:

• A multi-sector quantitative framework was developed.
• The framework was implemented across 64 countries.
• Labor supply shocks were modeled using remote work potential and lockdown stringency.

Main Results:

• Global supply chains accounted for one-quarter of the model-implied real GDP decline.
• "Renationalization" of supply chains did not generally enhance resilience to pandemic shocks.
• International trade can insulate countries with stringent lockdowns by reducing reliance on disrupted domestic inputs.

Conclusions:

• Global supply chains are a significant transmission channel for pandemic-induced economic downturns.
• Domestic supply chain reliance can exacerbate economic contractions during lockdowns.
• Lifting lockdowns unilaterally in major economies can boost GDP in smaller trading partners.