Stefan Pahl, Clara Brandi, Jakob Schwab, Frederik Stender · 2021
The World Economy

Cling together, swing together: the contagious effects of COVID‐19 on developing countries through global value chains

This paper aims at estimating the economic vulnerability of developing countries to disruptions in global value chains (GVCs) due to the COVID‐19 pandemic. It uses trade in value added data for a sample of 12 developing countries in sub‐Saharan Africa, Asia and Latin America to assess their dependence on demand and supply from the three main hubs China, Europe, and North America. Using first estimates on COVID‐19‐induced changes in final demand and production, we obtain an early projection of the GDP effect during the lockdowns that runs through trade in GVCs. Our estimates reveal that adverse demand‐side effects reduce GDP up to 5.4 percent, and that collapsing foreign supply puts an even larger share of countries’ GDP at risk. Overall, we confirm conjecture that the countries most affected are those highly integrated in GVCs (South‐East Asian countries). We argue, however, that these countries also benefit from a well‐diversified portfolio of foreign suppliers and demand destinations, possibly leading to a cushioning of economic downswing because COVID‐19 stroke major hubs at different times.

Full publication is available on: DOI 10.1111/twec.13094

Contributors from our Network

Stefan Pahl

Stefan Pahl
German Institute for Global and Area Studies (GIGA)

Stefan Pahl is postdoctoral researcher at the German Institute for Global and Area Studies (GIGA). His research focusses on the role of global value chains for economic development through job creation, productivity growth and structural change. Stefan has previously worked with UNIDO and IFPRI on topics of industrial development and structural transformation. He has been lecturer at the Groningen Growth and Development Centre (GGDC) at the University of Groningen where he also obtained his PhD.

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Clara Brandi

Clara Brandi
German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE)

Clara Brandi is Head of the Research Programme “Transformations of Economic and Social Systems” at the German Development Institute / Deutsches Institut für Entwicklungspolitik (DIE). She holds a PhD from the European University Institute, a Master’s degree from the University of Oxford (MPhil in Politics) and a Master’s degree in economics from the University of Freiburg, where she received the Hayek Award. Clara Brandi works on global governance and sustainable development, with a focus in the interplay between trade and the environment, paying particular attention to developing countries and emerging markets. Her current research includes a focus on voluntary sustainability standards and the drivers and effects of including non-economic issues in international trade agreements. Clara Brandi provides policy-advice at the national and the international level. She teaches at the University of Duisburg-Essen and at the University of Bonn.

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