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Disruptions of Global Supply Chains

Paper Session

Sunday, Jan. 8, 2023 8:00 AM - 10:00 AM (CST)

Hilton Riverside, Royal
Hosted By: American Economic Association
  • Chair: Laura Alfaro, Harvard Business School

Port Competition and World Trade

Giulia Brancaccio
,
New York University
Myrto Kalouptsidi
,
Harvard University
Theodore Papageorgiou
,
Boston College

Abstract

With 90% of international trade being carried out by oceanic shipping, world ports emerge as powerful gatekeepers. In this paper, we explore the impact of ports, as strategic players, on international trade, growth, and inequality across countries.

The Dynamics of Supply Chain Disruptions

Costas Arkolakis
,
Yale University
Federico Huneeus
,
Central Bank of Chile
Yuhei Miyauchi
,
Boston University

Abstract

This paper investigates how various shocks have disrupted global and domestic supply chain networks during the Covid-19 pandemic and how the dynamics of supply chain networks have affected the countries' and regions' economic activity in turn. To do so, we develop a dynamic general equilibrium model of production network formation across space where supplier-buyer relationships are continuously formed and destroyed. The theoretical framework attributes the dynamic evolution of production networks to region-specific shocks on productivity, demand, shipment cost, search and matching frictions, and relationship separation. We estimate these shocks using the universe of domestic firm-to-firm transactions with customs data capturing the import and export transactions of all firms in Chile. Through counterfactual simulations, we show how different shocks contribute to the ongoing supply chain disruption and welfare.

On the Aggregate Effects of Supply Disruptions

George Alessandria
,
University of Rochester
Shafaat Yar Khan
,
World Bank
Armen Khederlarian
,
University of Connecticut
Carter Mix
,
Federal Reserve Board
Kim Ruhl
,
University of Wisconsin-Madison

Abstract

We develop a two-country heterogeneous firm model with a rich set of supply chain frictions: shipping delays, fixed order costs, and storage costs. Shipping times and firm level demand are also stochastic. These frictions lead firms to hold inventories that depend on the source of supply, domestic or imported, and these inventories influence price setting. We show that transitory increases in shipping times can be quite contractionary and raise prices. These effects are larger when inventories are already at low levels, as in the U.S. and the World in 2021. The aggregate effects on employment and production are much larger when there is an input-output structure as delays constrain production. We show that the restocking cycle induced by these shocks is a source of endogenous persistence. We also show that a static trade model that abstracts from these supply chain frictions is unable to match the aggregate response predicted by our model, even with an equivalent trade cost shock.

Discussant(s)
Treb Allen
,
Dartmouth College
Oleksiy Kryvtsov
,
Bank of Canada
Meredith Startz
,
Dartmouth College
JEL Classifications
  • F1 - Trade
  • F4 - Macroeconomic Aspects of International Trade and Finance