Does the Import Diversity of Inputs Mitigate the Negative Impact of COVID-19 on Global Value Chains?

Discussion Papers

No.809

by Mitsuyo Ando and Kazunobu Hayakawa

February 2021

ABSTRACT

This study sheds light on the role of the import diversity of inputs and empirically explores the effects of COVID-19 on global value chains (GVCs). Specifically, we explicitly investigate the supply-side impacts of COVID-19 on GVCs during the period from January to August 2020 and examine how the import diversity of inputs influences such effects, using monthly export data of final machinery products for 35 countries and their indicator of diversity with 252 trade partner countries. As a result, we found that the negative supply-side effects are greatest in the transport equipment industry among three machinery industries. In addition, such negative impacts on machinery industries are larger during the trade fall period from February to May. Furthermore, we demonstrated that the import diversity of inputs played a significant role in partially mitigating the harmful supply-side effects of COVID-19, particularly during the initial period, i.e., February to March.

Keywords: COVID-19, Global value chains, Supplier diversification

JEL classification:F15, F53

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