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The impact of COVID‐19 on global value chains: Disruption in nonessential goods production
Abstract
Public health measures enacted to mitigate the spread of COVID‐19 have dampened economic activity by shuttering businesses that provide “nonessential” goods and services. Not surprisingly, these actions directly impacted demand for nonessential goods and services but the full impact of this shock on the broader economy will depend on the nature and strength of value chains. In a world where production chains are increasingly fragmented, a shock in one industry (or a group of industries) in one country will affect other domestic industries as well as international trade, leading to impacts on production in other countries. We employ the World Input‐Output Database to depict the interdependencies among both industries and countries, which provides a full representation of global value chains. By assuming a homogeneous impact to demand for nonessential goods and services around the world, we demonstrate asymmetric effects on production by industry and international trade, leading to asymmetric relative impacts to national economies. Our results indicate that if demand for nonessential goods and services decreases by 50%, the global gross domestic product will decline by 23%, leading to relative impacts that are larger in China, Indonesia, and some European countries. Also, international trade declines by almost 30%, largely due to a reduction in economic activity associated with the production of raw materials and certain types of manufacturing. This work highlights the relevancy of going beyond measuring the direct effects of COVID‐19 and provides insights into how international trade linkages will induce broader economic impacts across the globe.
... Literature with focus on stress responses emerged rapidly, looking at the pandemic's impact on supply and demand upstream and downstream along GVCs (Gereffi, 2020;Guan, Wang, Hallegatte, et al.., 2020;Pisch, 2020;Strange, 2020;Ferreira, Ramos, Barata, Court & Cruz, 2021) Further literature was then published stipulating that the pandemic could be beneficial to some extent for some non-lead firms. ...
... n and/or maintaining of industry participation and its resilience and recovery planning (Miroudot, 2020a;Fu, 2020;Gereffi, Pananond, & Pedersen, 2022) from the perspective of lead vs non-lead position in GVCs, as firms may see their power and profit alter and trade relations measures may be unrolled to provide support (Curran, Eckhardt & Lee, 2021;Ferreira et al,. 2021) including through regional cooperation (Kimura, Thangavelu, Narjoko & Findlay, 2020;Enderwick & Buckley, 2020). ...
... We recommend a blend of methodologies to better capture and advance this field in IB, and to better reflect upon the quasi-balance of methodology in the samples' papers, see Table 5 below. This is an approach in coherence with extracting relevant literature rather than to cover all articles published on the topic research so as to better inform theory (Snyder, 2019;Palmatier, Houston & Hulland, 2018). 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 (2020), Oliveira, et al. (2021), Sytch, et al. (2022 This confirms the contemporary evolution of IB in terms of an increasing openness to methodologies that link and leverage contributions made to IB, for example the important role of inputoutput analysis (Ferreira et al., 2021;Miroudot, 2020a;Inomata, 2018;Suder et al., 2015, et al.). ...
Purpose
In international business (IB), the discussion of COVID-19-related global value chain (GVC) models driving resilience has taken momentum since May 2020. The purpose of this study is to uncover insights that the pandemic provided as a unique research opportunity, holistically, revealing the significant role of non-lead firms in GVC outcomes and resilience. This allows to extend theory as the authors critically identify impact criteria and assess interdependence and valence, thus progressing the traditional (pre-pandemic) IB view of GVC governance and orchestration.
Design/methodology/approach
This study opts for an integrative review to help create a much-needed extension of IB theory by means of a critical perspective on GVC theory. The authors examine the extant body of IB literature as the relevant stock of collective IB knowledge prompted by the COVID-19 pandemic, uncovering contributions – with a focus on the role of non-lead firms in orchestration and resilience – that allows to clarify what was not evident pre-pandemic. With this, the authors move the theory from its efficiency focus to a better recognition of the interdependencies of power and profit outcomes stemming from asymmetries of interrelationships. By design, the authors focus on the unique research period of the pandemic and orchestration complexities along the development of configurational arguments beyond simple correlations (Fiss, 2011), revealing key dependencies as key themes. The authors highlight further research avenues following Snyder (2019) that are called upon to strengthen that understanding and that helps extend theory.
Findings
This research provides a critical perspective on the application of the traditional IB views for GVC governance (designed for efficiency, cost and proximity to markets with pre-dominance for just in time), which has shifted during the pandemic to accommodate for adaptation and adjustment to resilience and just in case considerations. The holistic review reveals not only the key country- and multinational enterprise (MNE)-dependencies with residual impact determining the balance between just-in-time and just-in-case. Also, the authors advance the understanding of the (un)balance of the traditional GVC – focused on just-in-case rather than just-in-time through a lead and non-lead GVC participation and power lens yet rarely observed. The authors find that governance should not be construed as “management” such that it resolves into decisions undertaken in lead firms for execution in subordinate GVC participants. Autonomy allows to subsidiary units by MNE lead firms and/or exercised by (mainly, innovative) non-subsidiary GVC participant firms, is uncovered as a key driver in this. Greater delegation capacity appears to help provide resilience to loss in profit, with a recognition that there may be a dynamic trade-off between power and profit. In addition, the authors are able to identify correlations with innovation, demand elasticity, digital uptake, investment and other, that the authors trust will set the scene for additional research deepening and extending the findings.
Research limitations/implications
Integrative literature reviews include a problem formulation (i.e. that is limited to published topics around an emerging theme) and are hence very focused in nature and approach. This applies to this paper. Data analysis in this method is not typically using statistical methods in contrast to meta-analyses. Also, the authors limit the sample to a relatively short time period with 33 publications analysed, purposefully focusing on the most prompt and “acute” insights into GVCs during the pandemic.
Practical implications
The traditional GVC governance model is designed for efficiency, cost and proximity to markets with pre-dominance for just in time. The authors reveal dependencies that are instrumental to better understand lead and non-lead interaction and relative autonomy, with a focus on residual impact determining the balance between just-in-time and just-in-case that, if in the sought equilibrium and agile, can allow alignment with context and this resilience. This paper specifically provides practical insights and visualization that highlights stages/“ripple” effects and their impact and the questions to ask as stakeholders look for GVC resilience. This includes, int.al., firms and their role as strategic agents, prompting participants through the learnings from exogenous shock to realign their strategies, redistributed manufacturing of production across subsidiary and non-subsidiary non-lead firms, greater competition and hence power for suppliers leveraging resilience and innovation, greater understanding of localization and regionalization of production of essential supplies, interaction with governments, and of investment impacts abroad especially to secure GVC participation.
Social implications
The insights provided through this extension of theory with its literature review reveal the importance of aligning IB research into GVCs to factors that became visible through alternative or unusual settings, as they have the power to reveal the limitations of traditional views. In this case, a mainly efficiency-led, just-in-time focused GVC governance model is reviewed through the literature that emanated during the pandemic, with a critical perspective, which helped uncover and underline the complexities and evolution of GVC governance, providing fundamental support to solutioning the continuing global supply chain challenges that started as a result of the pandemic and are yet again accelerated by the Ukraine and Middle Eastern wars and its impact with, int.al., concerns over possible severe global food, labour/migration and resources crises. IB holds a social responsibility to help identify critical challenges from the disciplinary perspective and help advance resilience for social benefit.
Originality/value
This paper supports the original IB theory development by extending GVC theory into the lead – non-lead dynamics that may, under certain conditions, provide a “Resilience wall” for GVCs. The value created through insights stemming from a unique period of time for GVC is significant. It allows us thus also to pave the way to an emerging and critical research adaption looking into equilibrium, nuancing demand elasticity, better understanding trade and investment impacts along GVCs and more. By examining views on the sources of pandemic risks in a possibly unique setting, the authors offer added value from extant IB research insights by combining them, revealing the importance for GVCs to investigate not only key dependencies between the exogenous shock, i.e. context, and the impacts assessed through this literature but to further use their inherent value to create a framework for further conceptualization and extension of the traditional IB view on GVC governance. This work illustrates the urgency and importance for IB to take a timely and possibly more critical approach to the investigation of governance models that have, to date, shown some significant limitations.
... The findings in the field of sales activities in individual sectors are particularly interesting. For example, Ferreira et al. (2021) employ the World Input-Output Database to depict the interdependencies among both industries and countries, which provides a full representation of global value chains. They demonstrated asymmetric effects on production by industry and international trade, leading to asymmetric relative impacts on national economies. ...
... Such a finding is consistent with the results presented in other studies e.g., Lapatinas (2020), or Barbieri et al. (2021). The only exception is grocery and pharmacy mobility in a firmer specification including also day-fixed effects, which is in line with the conclusion of Ferreira et al. (2021). Food and pharmaceuticals are essential goods that were in many cases subject to a less stringent regime or were even exempted entirely. ...
... However, using Google data based on GPS location, we consider retail and recreation mobility to be a sufficient proxy for the strictness of measures. This type of mobility reflects the mobility for essential goods, which is consistent with the study of Ferreira et al. (2021). An important finding is that social distancing measures reduced all types of social mobility (controlling for the non-working days). ...
This study investigates the effects of social distancing measures on various types of social mobility, using country- and day-fixed effects on a panel of daily data comprising 29 European countries. Although social distancing measures proved to be significant for all types of mobility in the examined period, they are best captured by retail and recreation mobility. Linear effects of restrictive measures on COVID-19 cases and deaths are examined by OLS regression with country- and day-fixed effects on a panel of 29 European countries, while non-linear effects were investigated by quantile regressions. Stricter mobility restrictions significantly reduced COVID-19 cases and deaths, but the variant of the virus was also an important determinant. Although the Delta variant was much more infectious, its mortality reduced. However, the impact of social distancing measures on COVID-19 cases and deaths was not constant but strengthened with increasing quantiles of the distribution of cases and deaths, suggesting that an early response from policy-makers was very important. Vaccination brought benefits for both cases and deaths, but a particularly beneficial effect can be seen on COVID-19 deaths. The vaccination benefits grew with the share of the vaccinated population. Distrust in public institutions proved to have a negative impact on both COVID-19 cases and deaths. The inclusion of a set of control variables (health, economic, social and demographic) revealed that country characteristics such as cardiovascular mortality, the share of male smokers, economic development, the proportion of the population living in extreme poverty, population density, the quality of education or the share of rural population were important determinants of COVID-19 spreads. The analysis of the linear and nonlinear effects of the stringency of measures on various categories of sales according to the digital cash collection system (eKasa) in Slovakia revealed that sales in essential sectors for consumers, such as retail and grocery stores, were relatively resistant to tightening measures, while sectors that are less essential for consumers were more sensitive to social distancing measures.
... GVCs firstly through market mechanism that led to GVC risk contagion: The adjustment of demand and supply enforces "stress response" (e.g., risk avoidance behaviors, activities, and actions) by individuals, firms, investors, governments, and other market agents via multiple channels. Note that all stress responses may cause or transfer the pandemic impacts on or to both supply and demand upstream and downstream along GVCs (Gereffi 2020;Guan et al. 2020;Pisch 2020;Ferreira, et al. 2021). ...
... This includes the important discussion of future GVCbound focus on human rights and sustainability (Voss 2020). Also, governments are facing great challenges in designing and conducting a well-balanced policy package with impact on effectively mitigation for MNEs of the impact of COVID-19 on GVCs (Buckley 2021) and support, attract or maintain industry for resilience and recovery planning (Miroudot 2020a;Fu 2020) as well as appropriate trade relations and measures (Curran, et al. 2021;Ferreira et al. 2021) and regional cooperation (Kimura, et al. 2020;Enderwick & Buckley 2020). ...
... This call for a blend of methodologies to better understand and advance GVC-focused literature in future IB is interesting as it reflects a quasi-balance of methodology in the sample's papers, see Table 5 below. (2020), Oliveira, et al. (2021) This confirms the contemporary evolution of IB in terms of an increasing openness to methodologies that link and leverage contributions made to IB, for example the important role of inputoutput analysis (Ferreira et al. 2021;Miroudot 2020a;Inomata 2018;Suder, et al 2015, et al.). ...
In International Business (IB), the discussion of COVID-19 related GVC models driving resilience has taken momentum since May 2020. This study opts for an integrative review to help create new knowledge through the conceptualisation of exogenous shock context with its succession to disruptive responses, leading to GVC impacts through country-and MNE-dependencies, with the residual impact determining the balance between Just-in-Time and Just-in-case that, if agile, allows alignment with context. To this effect, we examine the extant body of IB literature as current stock of collective IB knowledge, highlighting research avenues supporting further conceptualizing and theorizing of GVCs.
... This vulnerability extends beyond rankings, as globalization has increased Nigeria's economic interdependence, exposing it to risks such as market fluctuations, vulnerability to economic shocks, and difficulties in regulating transnational crime and terrorism (Jeko & Ndidi, 2022;Raimi & Lukman, 2023). Moreover, integration into global value chains has exposed Nigeria to supply chain disruptions, as seen during the COVID-19 pandemic, underscoring the need for robust domestic policies and strategies to mitigate these risks (Ferreira et al., 2021). ...
The onset of the industrial revolution marked a significant era of globalization, leading to a more interconnected international order. While globalization has advanced communication technology, it has also posed challenges that transcend national boundaries. Nigeria, despite ranking 109th globally and 11th in Africa for technology usage, faces vulnerabilities, as evidenced by its low rank of 123rd out of 169 countries in the 2021 Globalization Index. This indicates limited access to global opportunities and heightened susceptibility to external threats like terrorism. The research explores the feasibility of Nigeria achieving the 2030 UN's SDGs by examining the impact of globalization on its national development index. By using an exploratory design, the study conducted an online survey generated 460 responses from members of Niger Delta communities, analysed through ANOVA and Regression models. The findings reveal a significant correlation between globalization and national development in Nigeria. This conclude that globalization can enhance sustainable development by leveraging access to technology, finance, and markets, thereby driving economic growth. The study recommends that ministry of finance should develop policies leveraging globalization for technology transfer, finance access, and market expansion, while promoting sustainable practices. It also suggests government implementing targeted interventions to address challenges like poverty, inequality, and maternal mortality, focusing on areas with the greatest need. Finally, private and public sector companies should strengthening collaboration with international partners to facilitate knowledge sharing and capacity building for achieving the SDGs, highlighting the need for continued efforts despite overall progress.
... Every firm must make effective IP decisions in order to manage its WCM, which could have effects on its profitability. Recently, global supply chain disruptions, contractionary monetary and fiscal policies, price hikes, and exchange rate instability caused severe financial crises, resulting in reduced availability of loanable funds in the financial market (Alessandria et al., 2023;Ferreira et al.,2021;Fornaro and Wolf, 2023;Sajid et al., 2023). Furthermore, the International Monetary Fund predicted an economic slowdown, especially for developing countries, for the next five years (Eicher & Kawai, 2023). ...
Financial crises and macroeconomic imbalances have recently posed serious challenges to firms operating in developing countries. Thus, firms require efficient working capital management (WCM) to remain profitable. The purpose of this study is to examine the impact of WCM on firm performance (FPR) of 'Food & Personal Care Industry' of Pakistan using balanced panel data of 22 listed firms for the period of 2006 to 2022. Further, the study estimates the moderating effects of investment policy (IP) on WCM-FPR relationship. The study has used return on assets to measure FPR, while WCM is measured by a comprehensive measure of cash conversion cycle (CCC) comprising accounts receivable period (ARP), accounts payable period (APP), and inventory period (ITP). The findings reveal that CCC and ITP have a significant negative association with FPR, suggesting shorter CCC and ITP increase FPR. However, ARP and APP are positively associated with FPR, suggesting efficient utilization of ACR and delay in payment bills may increase FPR. Moreover, the results show that IP negatively moderates the impact of all components (except APP) of WCM on FPR. These results imply that a conservative IP mitigates the adverse impact of liberal WCM practice on FPR. The study also discussed the useful implications for managers and policymakers along with limitations of the study in the conclusion section.
... Following B. Baldwin, who studied aspects of the pandemic's impact on the tourism industry, at the initial stage of the spread of coronavirus infection, there were suggestions among scholars and practitioners that the negative economic consequences caused by it provoked such a shock to tourism and transportation services [7] that they would not be fully restored in the future. During the period of the active spread of coronavirus infection, the tourism industry received a powerful financial blow, which changed the expectations of sellers of tourism products regarding their expenses for advertising, promotion, and financial staff support. ...
The research relevance is predefined by the need to justify the introduction of state and regional programs of preventive economic measures for the tourism industry in regions such as the Mediterranean, as they do not have industrial potential and, in the event of emergencies, suffer significant losses and require more financial resources, assistance and time for their recovery. The research aims to identify the impact of the coronavirus pandemic on various sectors of the economy of the Mediterranean region of the European Union. The study used general and special methods such as analytical, statistical, comparative legal, as well as modeling and synthesis. It is determined that sellers of tourism products should be prepared to work effectively in shock conditions, such as a pandemic, as well as to increase the level of competition in this area. The study noted that the pandemic opens up new opportunities for the development of the tourism industry, in the context of increased competition among sellers of tourism products, there is a tendency to find new alternative ways to implement them, improve their quality level through the introduction of innovations, attracting investment, as well as new marketing strategies. The research's practical value lies in the fact that it substantiated the assumption that the tourism industry is the most vulnerable to the negative economic consequences caused by the spread of coronavirus infection in the world, especially for those regions where it is the leading sector of the economy
... The strong restrictions imposed on the international mobility of people and products hit tourism very hard and caused disruptions in global value chains (see, e.g., Ferreira et al., 2021), thus justifying that municipalities with significant foreign dependence (through a higher percentage of employment in the accommodation sector or a higher international openness level) were generally less resistance to the COVID-19 crisis. This relation between international dependence and the immediate impact of the COVID-19 crisis is observed in column (1) of Table 2 and was T A B L E 2 Models (regression output). ...
This study examines the impact of different regional determinants on heterogeneous territorial resilience to the COVID-19 crisis, highlighting the role of innovation, particularly the engagement of research and innovation (R&I) entities in networks with businesses. Two ordinary least squares (OLS) models were separately estimated for the resistance and the recovery phases, complemented by a multinomial logistic model, applied to test for a nonlinear relationship between R&I networks and territorial resilience. The results are robust concerning the positive influence on municipalities' resistance and recovery of having R&I entities collaborating in innovation consortia. Education, stability, and sectoral diversification of the local labor market are also essential for regions to be able to resist to the crisis but seem not important for recovery. Finally, international trade openness and pre-crisis labor performance penalizes both resistance and recovery from downturns.
... These pioneering works have provided significantly enriched insights into economic globalization and global imbalances, as well as the context of TNC and IB research, with a focus on the role of global production sharing. In recent TNC and IB research, there are growing calls for more mixed methodologies and insights from nontraditional methodologies into GVCs, including from IO (Ambos et al., 2021;Ferreira et al., 2021;Kano and Oh, 2020;Kwon 2020;McWilliam et al., 2020;Miroudot, 2020;Pla-Barber et al., 2021;Veselovská, 2020;Zhan, 2021). There are also calls to strengthen the understanding of firms therein . ...
This paper aims to advance research on transnational corporations (TNCs) and international business policy by identifying the role and influence of foreign-owned TNCs in global value chains (GVCs) compared with those of domestically owned firms. We do this by dividing the topology of trade in value added (TiVA) into three networks composed, respectively, of traditional trade, simple GVC trade and complex GVC trade, based on the OECD intercountry input-output data for 2005–2016. Our empirical results show that China’s domestically owned firms have not only been supply centres of manufacturing value added, but have also risen as new regional centres of both supply and demand for services through
simple GVC networks. Domestically owned firms of the United States dominate GVCs in services as a global center for both demand and supply, especially in complex GVC networks. TNCs located in Germany and the United Kingdom have
a dominant presence in providing value added in manufacturing and services, respectively, through complex GVC networks. By making GVCs visible through TiVA-based network analyses, this paper significantly extends the understanding of who dominates what types of GVC. This will help policymakers better monitor and enhance their GVC governance and competitiveness strategies in more flexible and diversified ways.
... The epidemic has had a devastating impact on human health and life. It has caused unprecedented disruptions in production, consumption, investment, supply chains, tourism, and trade, and it has had a profound effect on the economy of China and the world (Dewi and Melati, 2021;Ferreira et al., 2021;Karn, 2021). In terms of the impact of COVID-19 on labor demand and supply, market wage level and employment rate, some scholars found that COVID-19 had a dual impact on labor demand and supply. ...
The psychological problems and employment problems of college students have always been the focus of attention of all sectors of society. The COVID-19 epidemic has a great impact on the mental health and employment of Chinese college students. Under this background, this study discusses how epidemic anxiety affects the employment confidence and perception of employment situation of Chinese college students. Through the online questionnaire survey of 1,132 college students nationwide, and the ordinal logistic regression analysis of the survey data using Stata 16.0 software, the results show that: (1) Epidemic anxiety negatively affects Chinese college students' employment confidence and employment situation perception, and has a significant impact on employment confidence. The three control variables of employment guidance, older age and higher education have a significant positive impact on college students' employment confidence and employment situation perception. College students in the eastern region have stronger employment confidence and more optimistic employment situation perception. But the expected monthly salary is negatively correlated with employment confidence. (2) Male college students and Science and Engineering students' epidemic anxiety have a stronger negative impact on employment confidence and employment situation perception. (3) Employment guidance has a moderating effect on the relationship between epidemic anxiety, employment confidence and employment situation perception. Employment guidance can enhance college students' employment confidence and reduce their sense of employment crisis by alleviating epidemic anxiety. Combined with the research conclusions, it is proposed that the state and schools should pay attention to the psychological counseling of college students, strengthen the employment guidance of colleges and universities, vigorously support the development of small, medium-sized and micro enterprises, and improve the employment and entrepreneurship service system of college students, so as to promote the employment of college students.
... The effects of the pandemic on international trade are being investigated by Curran et al. (2021), when assessing the compatibility of individual trade policy interventions with WTO law. Ferreira et al. (2021) examine the dependence of the demand for insignificant goods and services on global gross domestic product. The results of their study show that with a drop in demand of 50%, gross domestic product will also fall by 23%. ...
The coronavirus pandemic has affected many segments and supplier relationships are no exception. Typical dangers in the delivery of goods are, above all, the risk of loss and the risk of damage, which is associated with the subsequent delay of the debtor in fulfilling the obligation to the creditor. However, at the time of the pandemic, the risk of delays or non-compliance increased due to the unexpected fact that the business relationship was affected by restrictions on cross-border transport. The advantage is that the parties use the Incoterms delivery conditions, which define the obligations of the seller and the buyer, are internationally recognized rules, and thus reduce the legal risks of the parties. The question arises, as is the case with the relationship between pandemic, delivery terms and liability in international trade when using Incoterms delivery terms. The authors assess the effects of the pandemic on mutual trade in general and subsequently on the example of traders between the Czech Republic and Poland. They also assess the situation in which, in the event of a pandemic, force majeure clauses can be invoked, as the pandemic or restrictions associated with the pandemic can be considered. While at the beginning of the pandemic in February and March 2020 it was possible to apply the impossibility of performance due to force majeure, at a later stage this cannot be done, but it is always necessary to examine the detailed conditions of the business relationship.
The employment of college graduates has always been the focus issue of the whole society. Affected by the COVID-19, college graduates are facing a severe employment situation. In the present study, we explore the impacts of the COVID-19 on the employment of college graduates. We explore the employment promotion measures introduced by Chinese government and colleges and universities through a quick review and illustrate the difficulties that college graduates face. Furthermore, the present study explores the impacts of the COVID-19 on five aspects of the employment of college graduates: recruitment demand reduce, employment competition rise, employment channels change, psychological anxiety increase and employment structural contradiction intensify. In addition, we conclude that the employment promotion measures introduced by Chinese government and colleges and universities in respond to the impacts of the COVID-19 on the employment of college graduates have significantly promoted the employment of college graduates to a large extent and we provide implications based on the application of the study. The findings of the present study are of great significance for all countries worldwide to better cope with various similar emergency events, to alleviate employment pressure and to promote better and fuller employment of college graduates.
Florida has one of the most diverse agricultural economies in the United States, producing several dozen types of fruits and vegetables that are consumed within the state, across the country, and around the world. The COVID-19 pandemic and resulting policy responses occurred during the peak of spring harvest season for many crops in Florida, abruptly removing market demand from the food service industry and shifting consumer purchasing habits, which enabled insights into several aspects of the fruit and vegetable supply chain. This article examines how the COVID-19 pandemic impacted fruit and vegetable industries in Florida, how these industries responded to COVID-19 impacts, and how Florida’s experience compared to that of other states. Data are derived from several sources including a statewide survey that measured agricultural production losses in Florida resulting from COVID-19 in early 2020, interviews with Florida operations that provided insights into how the pandemic induced change across the food supply chain, and a survey of food supply chain operations in three regions of the United States conducted in 2021.
As the first empirical study of the nonlinear effects of digital business on global value chains (GVC), we provide insight into the nonlinear effects of digital business on the global value chain (GVC) values. We employ four indicators, including the value of online selling, sales through E-commerce, and customer relationship management (CRM) usage, to capture the prevalence of digital business in the economy. By testing a sample of 25 European countries that have been analyzed using various econometric techniques over the period 2012–2019, our estimation results confirm that GVC values are a U-shaped function of digitalization. That is, an increase in digitalization pervasiveness initially induces more significant risks and uncertainties, hindering European countries from getting involved in or scale-up within the GVC. However, a rise in digitalization pervasiveness goes beyond a specific threshold, which facilitates GVC activities as more opportunities are created. Furthermore, our findings suggest that digital business contributes significantly to reducing the adverse influences of global uncertainty on the GVC values, while the marginal effects of digital business on GVC values become more pronounced in countries with the most advanced institutional structure.
This study analyzes the role of regional demographic, socioeconomic and political factors on changes in mobility during the COVID‐19 pandemic in Germany. Spatial econometric models are applied using data from the 401 counties in Germany. The model incorporates measures to reduce potential endogeneity effects. Our results show that mobility change shows significant socioeconomic heterogeneity which could affect future policy measures to contain the pandemic. For example, case numbers and the share of academics are negatively associated with changes in mobility. On the contrary, a region’s mean age and rural location have a positive impact. Political and economic implications of the results are discussed. The findings point to a possible reorganization of spatial, economic, and social activities beyond the course of the pandemic.
COVID-19 ile ilgili belirsizlikler ülkeler ve firmalar için önemli ekonomik sorunları beraberinde getirmiştir. Pandeminin neden olduğu ekonomik krizler ve kilitlenmeler, ticaret kesintileri dünyada eşi benzeri görülmemiş sorunlara neden olurken; uluslararası segmentlere ayrılan üretim süreçlerini de etkilemiştir. Bu belirsizlikler, üretimin farklı bölge ve firmalar tarafından gerçekleştirildiği ve üretim sonrası süreçleri de içeren bütüncül bir yaklaşımı ifade eden küresel değer zincirlerinin (KDZ) yeniden değerlendirilmesini gündeme getirmiştir. Küresel endüstrilerin KDZ analizlerinde yukarıdan aşağıya bir bakış açısıyla ele alınan yönetişim kavramının değerlendirmesi, pandemi sonrası sürecin yönetilmesi için özellikle önemlidir. KDZ içerisindeki yönetişim süreçlerinin net olarak algılanmasının bir sonucu olarak, zincirlerde ve/veya ağda faaliyet gösteren firmaların katma değeri yüksek üretim süreçlerine geçmesine ve lider firmalarla yakınlaşmalarına imkan sağlamaktadır. Bu bağlamda çalışma, KDZ'deki lider firmaları ve çeşitli tedarikçi ağlarını birbirine bağlayan yönetişim kavramını ele alarak salgın sonrası ile ilgili bir politika önerisi sunmayı amaçlamaktadır. Çalışmada elde edilen bulguların yerel, bölgesel ve uluslararası düzeyde faaliyet gösteren aktörler açısından pandemi sonrası KDZ'ye yönelik öneriler sunmaktadır.
This study projects the economic impacts of COVID-19 outbreak on the Brazilian economy using a dynamic interregional computable general equilibrium model. We considered two scenarios. The first scenario has two channels of transmission over the economic system: a negative shock of labour supply due to the rates of morbidity and mortality caused by the pandemic, and a temporary shutdown of nonessential economic activities. The second scenario adds to the first the effects of the government fiscal package adopted to counteract the effects of COVID-19 on the economy. Furthermore, in both scenarios, a sensitive analysis related to the temporality of the shutdown is considered by assuming 3 and 6 months of shutdown. The results indicate a reduction of 3.78% in the national GDP growth rate in Scenario 1 and a reduction of 0.48% in Scenario 2, in 2020, with 3 months of shutdown. With 6 months, the reduction would be greater, 10.90% and 7.64% in Scenarios 1 and 2, respectively. Thus, the government fiscal stimulus considered in this study partially mitigates the reduction in GDP projected under the COVID-19 outbreak. The study also presents sectoral projections at the national and state levels. The estimates indicate reductions in the GDP of most of Brazilian states in both scenarios.
In this paper, we conduct a comprehensive review of different economic policy measures adopted by 166 countries as a response to the COVID-19 pandemic and create a large database including fiscal, monetary, and exchange rate measures. Furthermore, using principle component analysis (PCA), we construct a COVID-19 Economic Stimulus Index (CESI) that combines all adopted policy measures. This index standardises economic responses taken by governments and allows us to study cross-country differences in policies. Finally, using simple cross-country OLS regressions we report that the median age of the population, the number of hospital beds per-capita, GDP per-capita, and the number of total cases are all significantly associated with the extent of countries’ economic policy responses.
Absent vaccines and pharmaceutical interventions, the only tool available to mitigate its demographic effects is some measure of physical distancing, to reduce contagion by breaking social and economic contacts. Policy makers must balance the positive health effects of strong distancing measures, such as lockdowns, against their economic costs, especially the burdens imposed on low income and food insecure households. The distancing measures deployed by South Africa impose large economic costs and have negative implications for the factor distribution of income. Labor with low education levels are much more strongly affected than labor with secondary or tertiary education. As a result, households with low levels of educational attainment and high dependence on labor income would experience an enormous real income shock that would clearly jeopardize the food security of these households. However, in South Africa, total incomes for low income households are significantly insulated by government transfer payments. From public health, income distribution and food security perspectives, the remarkably rapid and severe shocks imposed because of COVID-19 illustrate the value of having in place transfer policies that support vulnerable households in the event of ‘black swan’ type shocks.
Structured Abstract
Purpose
This paper aims to offer an insight into the fundamental changes taking place in Port wine production value chains. Specifically, we examine two distinct production regimes: when Port is aged and sold in the Greater Oporto and, alternatively, when it is produced, aged and sold in Douro.
Design/methodology/approach
The authors apply a tri-regional input-output model (Douro, Greater Oporto and Rest of the Country) for Portugal’s economy. This framework comprises a significant level of detail, with 431 products and 136 industries, the corresponding supply and demand for the products, by industry (for intermediate consumption) and final demand.
Findings
This study shows that the two regimes generate noteworthy, but quite heterogeneous, regional impacts. In both cases, the distribution of value added generates international and interregional trade flows. Moreover, the study reveals a greater capacity to capture national value added by getting the supply chain more intensive in localized services and by using state-of-the-art production techniques.
Originality/value
Using detailed regional data, we use disaggregated information, both for industries as well for territories, overcoming a common limitation in similar works that are grounded in international databases. Additionally, our approach integrates the trade interactions among industries and regions, which proves essential to uncovering spillovers resulting from the (direct and indirect) use of inputs from other regions and other countries.
During the last decades, input-output (I/O) economic models have assumed a prominent role in disaster impact analysis and resilience assessment. Rooted in general equilibrium theory and economic production theory, they catalyse attention on the distinction between direct economic losses and ripple effects that may be generated inside a multi-industry system as a consequence of perturbations. Empowering the I/O analysis framework and overcoming some of its inherent limitations is crucial in order to successfully approach emerging disaster assessment challenges, such as multi-regional loss quantification and the investigation of shock responses in global supply chains. In this paper, we review and discuss how different disaster modeling aspects have been incorporated in recent contributions exploiting I/O techniques, taking into account both demand- and supply-sided perturbation triggers, static and dynamic representations, as well as the assessment of economic resilience.
Studies on the rise of global value chains (GVCs) have attracted a great deal of interest in the recent economics literature. However, due to statistical and methodological challenges, most existing researches ignore domestic regional heterogeneity in assessing the impact of joining GVCs. GVCs are supported not only directly by domestic regions that export goods and services to the world market, but also indirectly by other domestic regions that provide parts, components, and intermediate services to final exporting regions. To better understand the nature of a country’s position and degree of participation in GVCs, we need to fully examine the role of individual domestic regions. Understanding the domestic components of GVCs is especially important for larger economies such as China, the USA, India, and Japan, where there may be large variations in economic scale, geography of manufacturing, and development stages at the domestic regional level. This paper proposes a new framework for measuring domestic linkages to global value chains. This framework measures domestic linkages by endogenously embedding a target country’s (e.g., China or Japan) domestic inter-regional input–output tables into the OECD inter-country input–output model. Using this framework, we can more clearly understand how global production is fragmented and extended internationally and domestically.
This paper presents a recursive dynamic multiregional supply-use model, combining linear programming and input–output (I–O) modeling to assess the economy-wide consequences of a natural disaster on a pan-European scale. It is a supply-use model which considers production technologies and allows for supply side constraints. The model has been illustrated for three floods in Rotterdam, The Netherlands. Results show that most of the neighboring regions gain from the flood due to increased demand for reconstruction and production capacity constraints in the affected region. Regions located further away or neighboring regions without a direct
export link to the affected region mostly suffered small losses. These losses are due to the costs of increased inefficiencies in the production process that have to be paid for by all (indirectly) consuming regions. In the end, the floods cause regionally differentiated welfare effects.
In 1995–2008, many countries experienced what we call the “value- added erosion.” It describes the decline in the sectoral shares of domestic value- added in a country’s exports as the country becomes more integrated into the global value chains (GVCs). We argue that the decline of the domestic value-added share in a country’s exports is likely to be caused by the expansion of high value- adding activities performed by foreign lead firms in the upper stream of the GVCs. The variables of interest — the domestic value-added share in exports and foreign high-skill labor embodied in a country’s exports (a proxy for foreign lead firms’ high value-adding activities) — are estimated using a multi-regional global input-output model. Using these results and other control variables, we apply a panel cointegration model to explain and assess the likelihood of value-added erosion and its possible determinants.
Macroeconomics models, such as the input–output model, the social accounting matrix, and the computable general equilibrium model, have been used for impact analysis of catastrophic disasters for some time. While the use of such models to disaster situation, which may quite differ from the ordinary economic setting, has been critiqued (for recent example, see Albala-Bertrand, 20134.
Albala-Bertrand, J.M. (2013) Disasters and the Networked Economy. Oxon, UK, Routledge.View all references), there are still valuable reasons for the use of such models. In particular, such models can be used in order to quickly provide a ballpark estimate of the system-wide impact for recovery plan and finance and/or to evaluate disaster countermeasures in the pre-event period. This paper presents how these methodologies have evolved to incorporate with disaster-specific feature and discusses how far they still need to go from the current stage. This paper also serves as a preface to this special issue, which encompasses several papers devoted to the use of macroeconomic data and models to assess economic losses from disasters.
List of figures List of tables 1. Introduction and overview 2. Foundations of input-output analysis 3. Input-output models at the regional level 4. Organization of basic data for input-output models 5. The commodity-by-industry approach in input-output models 6. Multipliers in the input-output model 7. Non-survey and partial survey methods: fundamentals 8. Non-survey and partial survey methods: extensions 9. energy input-output analysis 10. Environmental input-output analysis 11. Social accounting matrices 12. Supply-side models, linkages and important coefficients 13. Structural decomposition, mixed and dynamic models 14. Additional topics Appendix A. Matrix algebra for input-output models Appendix B. Reference input-output tables for the United States (1919-2005) Appendix C. Historical notes on the development of Leontief's input-output Index.
Fragmentation is a term used in this volume to describe cross-border component specialization and production-sharing. Examination of recent trade data suggests that offshore sourcing of parts and components, as well as offshore assembly, are assuming an increasing role in the world economy. The theoretical implications of this type of specialization are examined in several chapters with the aid of both Ricardian and Heckscher-Ohlin trade models. Production is first decomposed ("fragmented") into its constituent parts and activities, and then it is at this level that factor-intensities and technologies are calibrated. The implications of intra-product specialization and component trade are investigated under conditions of free, restricted, and preferential trade. The role of multinationals is explored and the importance of cross-border service-links among component activities is examined. Overall, extension of the principle of comparative advantage beyond products to the realm of parts and components is welfare-enhancing. Industries take advantage of offshore sourcing in order to reduce costs and increase competitiveness. Component specialization offers new and additional opportunities for the exploitation of scale economies. Across a broad range of conditions, it raises output and employment. Its effects on wages are spelled out. Trade between advanced, high-wage and developing low-wage countries is an obvious candidate for the two-way application of component specialization. The empirical part of the volume presents an evaluation of new data which allow the separation of trade in components and in final products. It also provides assessments of the role of component specialization in the trade of several countries and regions. In addition to their relevance for trade theorists and country specialists, the studies collected in this volume have interesting implications for the conduct of trade policy. They contradict claims that trade with low-wage countries must be welfare-reducing and they suggest new approaches to industrialization and economic development.
The emergence of global value chains (GVCs) has provided some firms the opportunity to internationalize by specializing in the production of specific inputs or tasks along the chain, with a direct impact on a country’s competitiveness. China, for instance, managed to enter low value added phases in GVCs to rapidly become a major player in world trade. Against this background, this paper asks whether North Africa, given its favourable geographic position in the Mediterranean and proximity to Europe, can grab similar opportunities. In particular, it analyzes the GVCs participation of North African firms and its implications for productivity. Since the coordination of vertically fragmented production processes increasingly relies on an adequate level of quality and reliability, especially when the inputs from several stages and locations must come together in a specific way, we identify firms involved in GVCs as traders with internationally recognized quality certification. Using a propensity score matching diff-in-diff method, the paper finds that firms that enter GVCs both perform better ex ante and show additional productivity gains ex post. Results suggest that policies designed to support certifications and compliance with international standards and to increase trust between firms in different countries, represent an important tool for linking developing countries to global production networks, with possible positive consequences on their economic development and growth.
This article provides guidance to prudent use of the World Input–Output Database (WIOD) in analyses of international trade. The WIOD contains annual time-series of world input–output tables and factor requirements covering the period from 1995 to 2011. Underlying concepts, construction methods and data sources are introduced, pointing out particular strengths and weaknesses. We illustrate its usefulness by analyzing the geographical and factorial distribution of value added in global automotive production and show increasing fragmentation, both within and across regions. Possible improvements and extensions to the data are discussed.
This paper rethinks the trajectories of regional development in an era of economic globalization. It argues for a more dynamic perspective on regional development that must incorporate both endogenous regional assets and strategic imperatives in global industries. Premised on theoretical advances in research into global production networks (GPNs) and global value chains (GVCs), a dynamic perspective of strategic coupling is further developed and reconstructed in this paper to demonstrate how regional development can result from the interaction effects of these regional assets and GPN logics. This perspective also points to different modes of strategic coupling for understanding the changing pathways of regional development. Several key issues for regional policy and practice are outlined to substantiate this call for a shift towards a dynamic and multi-scalar view of regional development in today's global economy.
This article describes the construction of the World Input–Output Tables (WIOTs) that constitute the core of the World Input–Output Database. WIOTs are available for the period 1995–2009 and give the values of transactions among 35 industries in 40 countries plus the ‘Rest of the World’ and from these industries to households, governments and users of capital goods in the same set of countries. The article describes how information from the National Accounts, Supply and Use Tables and International Trade Statistics have been harmonized, reconciled and used for estimation procedures to arrive at a consistent time series of WIOTs.
Denser networks of intermediate input flows between countries suggest ongoing international fragmentation of production chains. But is this process mainly taking place between countries within a region, or is it truly global? We provide new macroeconomic evidence by extending the Feenstra and Hanson () measure of fragmentation to a multicountry setting. We derive the distribution of value added by all countries involved in the production chain of a particular final good. This is based on a new input–output model of the world economy, covering 40 countries and 14 manufacturing product groups. We find that in almost all product chains, the share of value added outside the country-of-completion has increased since 1995. This is mainly added outside the region to which the country-of-completion belongs, suggesting a transition from regional production systems to “Factory World.” This tendency was only briefly interrupted by the financial crisis in 2008.
The economic effects of offshoring have been subject to extensive empirical analysis in the past, but many studies have not accurately distinguished between offshoring, domestic outsourcing, and the substitution of domestic by foreign suppliers. In this study I provide stylized facts on offshoring in Europe between 1995 and 2008 taking into account this distinction. I show that service inputs have been offshored and domestically outsourced, whereas material inputs have been either offshored or moved from domestic to foreign suppliers. The strong overall decline in the share of internal production evokes the question whether this has led to productivity gains within firms. I address this question by combining industry-level data on offshoring and domestic outsourcing with a firm panel. I find that offshoring of non-core activities has led to productivity gains whereas offshoring of core activities and domestic outsourcing have had no such effects. The estimated productivity gains are in particular driven by offshoring to low-wage countries and by the gains of multinational firms
Policy measures taken against the spread and impact of the coronavirus - 7
- Ec
The costs and benefits of home office during the covid‐19 pandemic: Evidence from infections and an input‐output model for Germany
- Fadinger
Guidance for critical workers
- Govuk
This is not a conventional recession and G.D.P. is not the target.The New York Times 01/04/2020
- P Krugman
Identifying critical infrastructure
- Cisa
Effects of novel coronavirus (COVID-19) on civil aviation: Economic impact analysis
- Icao
International tourist numbers could fall 60-80% in 2020
- Untwo
TrueCar's ALG forecasts new vehicle auto sales for
- Alg True's Car
Disentangling global value chains
- De Gortari
Macroeconomics of the flu
- Weder
Fiscal policy multipliers and spillovers in a multi‐regional macroeconomic input‐output model
- Kratena
The responses of consumption and prices in Japan to the COVID‐19 crisis and the Tohoku earthquake
- Watanabe