Working Paper: NBER ID: w28395
Authors: Cem Akmakl; Selva Demiralp; Ebnem Kalemlizcan; Sevcan Yeilta; Muhammed A. Yıldırım
Abstract: We develop a multi-sector-country model with input-output linkages to study the effects of sectoral demand and supply shocks within the global trade and production network. Using the model, we quantify output losses of advanced economies (AEs) stemming from lack of vaccinations in the emerging markets and developing economies (EMDEs) during Covid-19. The sectoral shocks for 65 countries and 35 sectors are based on changes in sectoral consumption demand and labor supply as a function of infections. Endogenous lockdowns triggered by lack of vaccinations in EMDEs hurt AEs via a shortage of intermediate inputs, higher import prices, and weak demand for their exports. We provide upper and lower bound estimates for negative output effects of global supply chain disruptions, depending on the degree of complementarity across factors of production. Vaccinating EMDEs is a high return investment for AEs to smooth out the economic impact of the pandemic in their home countries.
Keywords: vaccinations; COVID-19; global economy; output losses; international production networks
JEL Codes: F0; F15; F16; F2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| lack of vaccinations in emerging markets and developing economies (EMDEs) (I15) | output losses in advanced economies (AEs) (F41) |
| sectoral shocks (F41) | real GDP changes in advanced economies (AEs) (E20) |
| vaccinating emerging markets and developing economies (EMDEs) (I15) | output losses in advanced economies (AEs) (F41) |