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Resilience and robustness of Global Supply Chains under risk and ambiguity

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  • Jason Allen

Abstract

The Resilience and robustness of Global Supply Chains (GSC) is heavily impacted by aggregate shocks, such as Covid-19 implying ruptures in supply, supply, demand or transportation. We propose a model in which GSCs are composed of firms which sell to each other and final customers. These firms face risks and ambiguities, as sourcing inputs from abroad exposes domestic firms to foreign shocks: the costs and effects of delinking; the propagation of micro into macro shocks; GSCs amplify the trade impact of macro shocks. The fully rational risk and ambiguity averse agents internalise the survival probability. Our model is an extension of the Caliendo-Parro (2015) roundabout framework.

Suggested Citation

  • Jason Allen, 2022. "Resilience and robustness of Global Supply Chains under risk and ambiguity," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 65(3), pages 90-104.
    • Handle: RePEc:eei:journl:v:65:y:2022:i:3:p:90-104
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    More about this item

    Keywords

    Risk; ambiguity; Global Supply Chain; uncertainty; aggregate shocks; Covid-19;
    All these keywords.

    JEL classification:

    • E7 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality

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