The Aggregate Effects of Global and Local Supply Chain Disruptions: 2020–2022
Year: 2023
Type: report
Abstract: This paper studies the aggregate effects of supply chain disruptions in the post-pandemic period in a heterogeneous-firm, general equilibrium model with input-output linkages and a rich set of supply chain frictions: uncertain shipping delays, fixed order costs, and storage costs. Firms optimally hold inventories that depend on the source of sup- ply, domestic or imported. Increases in shipping times are contractionary, raise prices, and increase stockouts, particularly for goods intensive in delayed inputs. These effects are larger when inventories are already at low levels. The paper fits the model to the United States and global economies over 2020|2022 and estimates large aggregate effects of supply disruptions. The model predicts that the boost in output from reducing delays will be smaller than the contraction from the waning effects of stimulus.
Institutions: University of Wisconsin–Madison, University of Connecticut
Language: English
Topic: COVID-19 Pandemic Impacts
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W4364861069