Probable Change Of Production Chains With Industrial Networks And Clusters Based On Specialization And Division Of Labour After The Pandemic

After the COVID-19 pandemic, the whole world will operate remarkably differently over its global production chain. This paper develops a general equilibrium model with endogenous industrial cluster and endogenous industrial network based on the division of labor and specialization to formalize and explore the interrelationship and rules of industrial cluster, network of division of labor, the economies of specialization and agglomeration under the new era of post-pandemic global economy. The model suggests that institutional efficiency of mutual trust, and competition among countries and industries will facilitate important circular effects, which will propel and shape the arrangement and allocation of industrial clusters, the position located at the production chain, and consequently the status of economic growth. In particular, the improvements in institutional efficiency of mutual trust over economic and technology systems will expand the demand for transactions and network size, which in turn will determine the development of cluster and network scope, as well as the position of the network. It offers a partially economic explanation of the current concern of de-globalization, decoupling and de-risking after the pandemic.