Vertical Linkages and the Collapse of Global Trade

Bems, Rudolfs; Johnson, Robert C.; Yi, Kei-Mu

doi:10.1257/aer.101.3.308

Cited by 185 publications

(144 citation statements)

References 4 publications

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“…Levchenko, Lewis, and Tesar (2010) stress that sectors with goods used as intermediate inputs experienced substantially bigger drops in international trade. Likewise, Bems, Johnson, and Yi (2011) confirm the important role of trade in intermediate goods. These findings are consistent with our modeling approach.…”

Section: Introductionmentioning

confidence: 57%

“…However, most evidence indicates that trade policy barriers moved little during the recession (Evenett 2010;Bown 2011;Kee, Neagu, and Nicita 2013), while freight rates actually declined for most modes of shipping, given the slackening of trade flows and surplus capacity. In the absence of rising trade costs, it is similarly difficult to relate the excessive responsiveness of trade to 'back-and-forth trade' or 'vertical specialization' (Bems, Johnson, and Yi 2011). For example, if demand for final goods drops by 10%, then in the standard framework demand for intermediates typically also drops by 10% throughout the supply chain.…”

Section: Motivation: Uncertainty Shocks and International Tradementioning

confidence: 99%

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Trade and Uncertainty

Novy¹,

Taylor²

2014

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We offer a new explanation as to why international trade is so volatile in response to economic shocks. Our approach combines the uncertainty shock idea of Bloom (2009) with a model of international trade, extending the idea to the open economy. Firms import intermediate inputs from home or foreign suppliers, but with higher costs in the latter case. Due to fixed costs of ordering firms hold an inventory of intermediates. We show that in response to an uncertainty shock firms optimally adjust their inventory policy by cutting their orders of foreign intermediates disproportionately strongly. In the aggregate, this response leads to a bigger contraction in international trade flows than in domestic economic activity. We confront the model with newly-compiled monthly aggregate U.S. import data and industrial production data going back to 1962, and also with disaggregated data back to 1989. Our results suggest a tight link between uncertainty and the cyclical behavior of international trade.

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Section: Introductionmentioning

confidence: 57%

Section: Motivation: Uncertainty Shocks and International Tradementioning

confidence: 99%

Trade and Uncertainty

Novy¹,

Taylor²

2014

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“…We address the links between fragmentation and the creation of income and jobs based on a new input-output model of the world economy using industry-level data. This is not a new methodology but extends the approach used in Johnson and Noguera (2012) and Bems, Johnson and Yi (2011), which in turn revived an older literature on input-output accounting with multiple regions going back to Isard (1951) and in particular work by Miller (1966). We will extend this by further decomposing value added into the various factor inputs.…”

Section: Introductionmentioning

confidence: 94%

Fragmentation, Incomes, and Jobs: An Analysis of European Competitiveness

Timmer¹,

Los²,

Stehrer³

et al. 2014

Policy Research Working Papers

142

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. All rights reserved. Terms of use: Documents in ISSN 1725-2806 (online) EU Catalogue NoQB-AR-13-112-EN-N (online)Any reproduction, publication and reprint in the form of a different publication, whether printed or produced electronically, in whole or in part, is permitted only with the explicit written authorisation of the ECB or the authors. Marcel P. Timmer (corresponding author)University of Groningen; e-mail: m.p.timmer@rug.nl Bart Los University of Groningen Robert StehrerThe Vienna Institute for International Economic Studies (WIIW) Gaaitzen de Vries University of Groningen AbstractIncreasing fragmentation of production across borders is changing the nature of international competition. As a result, conventional indicators of competitiveness based on gross exports become less informative and new measures are needed. In this paper we propose an ex-post accounting framework of the value added and workers that are directly and indirectly related to the production of final manufacturing goods, called 'manufactures GVC income' and 'manufactures GVC jobs'. We outline these concepts and provide trends in European countries based on a recent multi-sector input-output model of the world economy. We find that since 1995 revealed comparative advantage of the EU27 is shifting to activities related to the production of non-electrical machinery and transport equipment. The workers involved in manufactures GVCs are increasingly in services, rather than manufacturing industries. We also find a strong shift towards activities carried out by high-skilled workers, highlighting the uneven distributional effects of fragmentation. The results show that a GVC perspective is needed to better inform the policy debates on competitiveness.

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“…The most prominent series of papers focus on trade theory and trade in value-added in particular. Triggered by the concepts of international fragmentation, global supply chains, and slicing up the value chain, several papers have been published on this topic (Trefler and Zhu, 2010;Bems et al, 2011;Johnson and Noguera, 2012;Koopman et al, 2013). And again, there is a lot of old wine in new bottles.…”

Section: Final Remarksmentioning

confidence: 99%