Adapting to Graduation within Global Value Chains: Potential Increases in Trade Costs Associated with the Tuna Industry in the Solomon Islands

Abstract This paper develops a model to study the impact of trade costs on developing countries’ industrialization when sequential production is networked in global value chains (GVCs). In a two-country setting, a decrease in trade costs of intermediates is associated with South joining and moving up the value chain and both North and South experiencing a welfare improvement. The wage gap between North and South first increases and then decreases. Extending the model to a multi-country setting, I show that reduced trade frictions lead to South countries joining GVCs due to wage differentials and low trade costs. This increases the wage in North but may decrease the wages of South countries that are already part of the network. Moreover, South countries that join tend to be regionally clustered. The model provides a first look at GVCs from the development angle, and raises policy questions regarding the governance of GVCs.

Download Full-text

On the Geography of Global Value Chains

Econometrica ◽

10.3982/ecta15362 ◽

2020 ◽

Vol 88 (4) ◽

pp. 1553-1598 ◽

Cited By ~ 9

Author(s):

Pol Antràs ◽

Alonso Gortari

Keyword(s):

International Trade ◽

General Equilibrium ◽

Equilibrium Model ◽

Marginal Cost ◽

Global Value Chains ◽

Real Income ◽

Optimal Location ◽

Trade Costs ◽

Value Chains ◽

Multi Stage

This paper develops a multi‐stage general‐equilibrium model of global value chains (GVCs) and studies the specialization of countries within GVCs in a world with barriers to international trade. With costly trade, the optimal location of production of a given stage in a GVC is not only a function of the marginal cost at which that stage can be produced in a given country, but is also shaped by the proximity of that location to the precedent and the subsequent desired locations of production. We show that, other things equal, it is optimal to locate relatively downstream stages of production in relatively central locations. We also develop and estimate a tractable, quantifiable version of our model that illustrates how changes in trade costs affect the extent to which various countries participate in domestic, regional, or global value chains, and traces the real income consequences of these changes.

Download Full-text

Footloose Global Value Chains: How Trade Costs Make a Difference

Review of Industrial Organization ◽

10.1007/s11151-020-09773-z ◽

2020 ◽

Vol 57 (2) ◽

pp. 245-261

Author(s):

Adam Jakubik ◽

Victor Stolzenburg

Keyword(s):

Global Value Chains ◽

Trade Costs ◽

Value Chains

Download Full-text

Trade costs and borders in global value chains

Review of World Economics ◽

10.1007/s10290-017-0280-6 ◽

2017 ◽

Vol 153 (3) ◽

pp. 487-509 ◽

Cited By ~ 2

Author(s):

Kirill Muradov

Keyword(s):

Global Value Chains ◽

Trade Costs ◽

Value Chains

Download Full-text

International trade barriers and regional employment: the case of a no-deal Brexit

Journal of Economic Structures ◽

10.1186/s40008-021-00241-9 ◽

2021 ◽

Vol 10 (1) ◽

Author(s):

Hans-Ulrich Brautzsch ◽

Oliver Holtemöller

Keyword(s):

International Trade ◽

National Level ◽

Global Value Chains ◽

Trade Costs ◽

Value Chains ◽

Trade Barriers ◽

Input Output ◽

Regional Employment ◽

Employment Effects ◽

The Eu

AbstractWe use the World Input–Output Database (WIOD) combined with regional sectoral employment data to estimate the potential regional employment effects of international trade barriers. We study the case of a no-deal Brexit in which imports to the United Kingdom (UK) from the European Union (EU) would be subject to tariffs and non-tariff trade costs. First, we derive the decline in UK final goods imports from the EU from industry-specific international trade elasticities, tariffs and non-tariff trade costs. Using input–output analysis, we estimate the potential output and employment effects for 56 industries and 43 countries on the national level. The absolute effects would be largest in big EU countries which have close trade relationships with the UK, such as Germany and France. However, there would also be large countries outside the EU which would be heavily affected via global value chains, such as China, for example. The relative effects (in percent of total employment) would be largest in Ireland followed by Belgium. In a second step, we split up the national effects on the NUTS-2 level for EU member states and additionally on the county (NUTS-3) level for Germany. The share of affected workers varies between 0.03% and 3.4% among European NUTS-2 regions and between 0.15% and 0.4% among German counties. A general result is that indirect effects via global value chains, i.e., trade in intermediate inputs, are more important than direct effects via final demand.

Download Full-text