Adnan Seric, Holger Görg, Wan-Hsin Liu, Michael Windisch, 07 January 2021

The Covid-19 pandemic has exposed the fragility of the global trade network underpinning global value chains. Initial disruptions in the supply chains for key medical goods due to surges in demand and newly erected trade barriers have prompted policymakers around the world to question their country’s reliance on foreign suppliers and international production networks. This column takes a closer look at China’s post-pandemic recovery and argues that its response may hold clues to the future of global value chains.

James Anderson, Yoto Yotov, 20 December 2020

The gravity equation of international trade raises several empirical puzzles relating to the decreasing impact of distance, the declining trade-related costs of bilateral trade, and the estimation of trade elasticities. This column introduces a new, ‘short-run gravity’ model which simultaneously resolves all three of the above-mentioned puzzles. The model estimates a 14% decline in the distance elasticity and shows that capacity reallocation raised world manufacturing trade by 75% between 1998 and 2006. Finally, an estimated structural parameter implies that the short-tun trade elasticity is about one-fourth of its long-run counterpart. 

Julian di Giovanni, Andrei Levchenko, Isabelle Mejean, 14 December 2020

Superstar firms have recently been linked to phenomena such as top income inequality, comparative advantage in trade, and the fall in the labour share. Another important feature of superstar firms is their international trade linkages. This column studies how susceptible an economy with few large firms which account for the majority of imports and exports is to international business cycle shocks.  It finds that at the micro level, such larger firms respond more strongly to foreign shocks than smaller firms. At the macro level, this heterogeneity dampens the domestic GDP response to a foreign shock. 

Anirudh Shingal, Prachi Agarwal, 08 December 2020

International health crises have the ability to send shockwaves through global value chains. This column examines how value chains have responded to two previous health shocks – SARS and MERS – in order to draw lessons for the current pandemic. There is evidence of geographical diversification within value chains, as well as of an overall non-resilience to the SARS epidemic in particular. The effects are driven by lower-middle-income importers that were more integrated in global value chains, received more investment, were more competitive, and were more reliant on the severely affected partners. Similar disruptions are likely to follow Covid-19.

Federico Di Pace, Luciana Juvenal, Ivan Petrella, 28 November 2020

The abrupt movements in commodity prices at the onset of the Covid-19 crisis have reignited policymakers’ concerns over movements in the terms of trade. The shock has certainly confirmed that terms of trade are very volatile and extremely sensitive to changes in global economic activity. This column argues that these terms of trade shocks are likely to have a persistent impact on the business cycle of developing economies, which are particularly vulnerable to fluctuations in the price of their exports.  

Christine Arriola, Przemyslaw Kowalski, Frank van Tongeren, 15 November 2020

The Covid-19 pandemic has left in its wake a global economy damaged beyond what was thought possible a decade ago. The globalised nature of the 21st century global economy is a key component in terms of the dynamics, and effects, of the virus. This column presents an analysis of the importance of global value chains, both during the pandemic and throughout the recovery process. The results of the study suggest that increased localisation could do more harm than good, and that the international network of interconnected supply chains remains key to producing essential goods and services.

Guillaume Vuillemey, 27 September 2020

The maritime shipping industry has been the backbone of globalisation, carrying 80% to 90% of global trade flows. This column shows that over the past four decades, shipping firms are being systematically structured to evade corporate responsibilities. Potential tort liabilities, for example in case of an oil spill, are evaded by registering each ship in a different subsidiary; regulatory standards are evaded by using flags of convenience; and long-term responsibilities related to ship recycling are evaded using so-called last-voyage flags.

Ravi Kanbur, 21 September 2020

From the public discourse, it seems clear that we are living in an age of rising inequality. However, common measures of income and consumption inequality disguise a more nuanced pattern of inequality change across the world. This column argues that inequality within countries has not been rising everywhere and that inequality between countries has decreased. At the same time, technological progress is increasingly displacing basic labour in favour of skilled labour and capital, across borders, and widening the wage gap. The overall effect is unclear. National policies to mitigate inequality are needed but, in the absence of international cooperation, are constrained by cross-border spillovers.

Giordano Mion, Luca David Opromolla, Gianmarco Ottaviano, 28 August 2020

Understanding whether certain jobs are ‘good’ or ‘bad’ is a complex question that can be approached in numerous ways. Clarifying what factors make particular occupations within particular firms suitable for different people is at the heart of this discussion. This column presents evidence from a study untaken in Portugal, focusing on domestic versus internationally active firms. The results indicate that firms which are more international provide better career paths for managers, perhaps due to better overall managerial practices.

Joshua Aizenman, Hiro Ito, 07 August 2020

The political-economy trilemma, introduced by Dani Rodrik (2000), asserts that the three policy goals of national sovereignty, democracy, and globalisation, cannot all be achieved to the full extent simultaneously. This column investigates this trilemma by developing indexes that measure the extent of attainment of the three factors during 1975-2016. It finds that there is a linear relationship between globalisation and national sovereignty (i.e. a dilemma) for industrialised countries, while all three indexes are linearly correlated (i.e. a trilemma) for developing countries.

Mai Dao, Mitali Das, Zsoka Koczan, 20 July 2020

The declining labour share of income is a global phenomenon that has affected primarily low-skilled and middle-skilled workers. This column examines the effects of trade and technology on the labour shares of different skill groups using a new dataset covering both advanced and developing economies. Both trade and technology have contributed to the declining labour share of middle-skilled workers but have had little effect on low-skilled and high-skilled labour. Policies should be designed with the goal of spreading the benefits of globalisation to the entire labour force.

Richard Baldwin, Rikard Forslid, 16 July 2020

Changes in working patterns inspired by Covid-19 may transform the development path of many economies. The column argues that, as we adjust to remote working, a new era of telemigration may drive demand for globalisation in services. This may be good news for many emerging economies, because they can exploit their comparative advantage in labour without having to manufacture goods.

Ester Faia, Sébastien Laffitte, Maximilian Mayer, Gianmarco Ottaviano, 17 June 2020

Understanding the effects of automation and offshoring on labour markets and growth has been a significant topic of interest. This column argues that automation and offshoring fundamentally affect the matching between firms and workers and do so in contrasting ways. It predicts that automation will increase firms’ and workers’ job selectivity and decrease employment, while offshoring will have the opposite effect. Empirical evidence as well as a quantitative model support this hypothesis and provide a mechanism of technological change typically missed in standard neoclassical reasoning.

Youngmin Baek, Kazunobu Hayakawa, Kenmei Tsubota, Shujiro Urata, Kenta Yamanouchi, 03 June 2020

Anti-globalisation sentiment has been spreading around the world in recent years. Since trade liberalisation is one of the representative characteristics of globalisation, investigating who benefits from it, and to what extent, can be an important starting point in analysing the causes of anti-globalisation sentiment and promoting liberalisation. This column explains how the rent from trade liberalisation, in the form of tariff reductions, is distributed among foreign producers, wholesalers, and consumers by investigating the tariff pass-through for each player.

Anna Stansbury, Lawrence H. Summers, 02 June 2020

Since the early 1980s, the US has seen a falling labour share and slow wage growth for typical workers, while measures of corporate valuations and measured markups have increased. A number of papers have argued that increasing monopoly or monopsony power can explain these trends. This column argues instead that the decline in worker power in the US economy is a more compelling explanation for recent macro trends than a broad-based rise in monopoly power.

Hans-Joachim Voth, 26 May 2020

The Covid crisis has prompted the question of how much mobility a globalised world can and should have. This column, taken from a VoxEU eBook, breaks the question down into two elements: Is a massive restriction of mobility desirable? And is it feasible at all? The free exchange of goods and capital does not have to be restricted; only very few diseases are transmitted by contaminated goods. On the other hand, while the free movement of people also contributes to the advantages of globalisation, it is far less important for production. Severe restrictions may well be desirable and justifiable, bringing to an end a half-century of ever-increasing individual mobility.

Charles Goodhart, Duncan Needham, 16 May 2020

The COVID-19 crisis presents a multi-faceted challenge to policymakers. A combination of declining commodity prices, the rise in unemployment, and emergency state spending are all set to create challenging economic conditions, even as the pandemic itself subsides. This column argues that one mechanism that could help control long-run inflation levels is the issuance of long-dated gilts. This would also help to protect the young and unborn generations from the threat of resurgent inflation, which could lead to a massive rise in their future debt service requirements. 

Kemal Kilic, Dalia Marin, 10 May 2020

In the wake of the Global Crisis, uncertainty in the world economy led many firms to reassess their business models. Rather than relying on global supply chains, an increasing number of firms invested in robots, which prompted a renaissance of manufacturing in industrialised countries. This column argues that changes in the world economy due to COVID-19 make a V-shaped recovery from the coming recession unlikely. Instead, COVID-19 will accelerate the process begun after the Global Crisis by encouraging firms to re-shore activity back to rich countries.

Douglas Irwin, 05 May 2020

The COVID-19 pandemic has led policymakers and business leaders to question whether global supply chains have been stretched too far. This column argues that the pandemic simply adds further momentum to the deglobalisation trend. The fourth era of globalisation appears to have peaked in 2008, and since then we have been in an era of ‘slowbalisation’.

Adnan Seric, Deborah Winkler, 28 April 2020

The COVID-19 pandemic has exposed the vulnerabilities of global value chains. In response to supply chain risks, global lead firms have relied on Industry 4.0 technologies as well as reshoring parts of production. This column explores the potential impacts of these developments on the breadth and depth of global value chains. Automation and reshoring allow for more flexible adjustment to changing demand and the mitigation of supply-side risks. Ultimately, the implications of automation on development will depend on both the types of foreign inputs sourced as well as the relationship between robots and labour.

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