CoPS/IMPACT Working Paper Number G-281

Title: Global Supply Chains: towards a CGE analysis

Authors: Prema-chandra Athukorala, Peter B. Dixon and Maureen T. Rimmer


Economists have analysed global supply chains (GSC) using pure theory, case studies, econometrics and input-output calculations. We now need a new type of computable general equilibrium (CGE) model to show how GSC trade affects welfare and its distribution between and within nations. The new model must recognize: fragmentation of production; scale economies; intermediate inputs that cross national borders multiple times embodied in products at different stages of completion; and decision-making by global agents. We describe a prototype that incorporates these features and gives interpretable results not attainable with a standard CGE model. We discuss steps to move from the prototype to a policy-relevant model.

JEL classification: F12, F60, C68, C67.

Key words: Global supply chains, Computable general equilibrium modelling, Global decision making, Footloose activities, Trade costs.

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