GLOBAL PRODUCTION NETWORKS IN THE REGIONAL ANALYSIS FRAMEWORK: CASE OF THE EU PERIPHERAL AUTOMOTIVE MANUFACTURING

Recent transformations following the global financial crisis of 2009, COVID-19 pandemic, supply chains disruptions and newest shocks have radically reshaped global production landscape and challenged comparative benefits of global production networks (GPN) vs global value chains (GVC) paradigms in international production analysis. The study tests the hypothesis that GPN concept allows for a better identification of structural shifts in international production structures while revealing regional patterns of cooperation. In the first section, the main methodological constraints of GVC paradigm are specified. Additionally, the reasons for the application of network-based approach to international production are outlined. The second section dissects the EU automotive manufacturing to support the theoretical propositions. While comparing GVC and GPN quantitative toolkits, the possible trade-off has been reached which is to calculate network indicators (transitivity, centrality, etc.) on the inter-country input-output tables. As a result, the hypothesis was confirmed. Specifically, betweenness centrality metric suggests that Czechia and Slovakia have immediately favoured a positive effect of the entry into the EU, whereas neither of GVC indicators reveals such a shift. Simultaneously, 2008 crisis is depicted via GVC indicators, whilst network metrics suggest no structural changes in the production system. These results corroborate to our theoretical juxtaposition of GVC/GPN approaches. The methodological cohesion of two sets of indicators further advances the views on European regional core-periphery integration and automotive production networks dynamics. At the same time, the findings may contribute to the reassessment of regional integration developments in Europe, as well as in Latin America and Eurasia. © González G. H., Sapir E. V., Vasilchenko A. D. Text. 2023.

Intervention policy influence on the effect of epidemiological crisis on industry-level production through input–output networks

During a global epidemiological crisis, lockdowns and border closures substantially disrupt international supply chains, underscoring the importance of choosing an intervention policy that accounts for the unique structure of input–output linkages among domestic industries. This study develops a pioneering mathematical model to quantify the role of pandemic-related intervention policies in the economic impact of a pandemic outbreak in an economy where sectors are complements throughout input–output networks. Our approach is based on three pillars — epidemiological, social, and economic sub-models. Moreover, we present in silico computer simulations to examine the influence of work capsules, work-from-home, vaccination, and industry closure on the damage a pandemic could inflict on output at the industry level. A comparison between work capsules and work-from-home policies shows that the latter decreases economic loss much more than the former. Compared to a state without interventions, a work-from-home policy affecting 12% of the workforce will decrease output loss by 1.4 percentage points during an epidemiological crisis following a COVID-19-like outbreak. Under the constraint of choosing one intervention policy, vaccination significantly reduces the loss of output, particularly in industries that require close customer–seller contacts. In the analysis of scenarios of integrating intervention policies, it is found that, using direct marginal contribution as the measure, the vaccination intervention is approximately 4.5 times more effective at reducing output loss than the work-from-home intervention. © 2023 Elsevier Ltd

[The experience of Japan: the application of the intersectoral balance methodology to control health care costs as a factor of mobilization readiness of health care to COVID-19 pandemic].

One of possible reasons for success of Japan in confronting the COVID-19 pandemic (low mortality rates, refusal of hard lock-downs and relatively low fall in economy) is seen in record high (3-4 times higher than in most other developed countries) provision of hospital beds. Its financing was supported during first 2 decades of the XXI century by the policy of relative to GDP advanced growth of public health public expenditures based on assessment of multiplier impact of these expenditures on demand, production and employment in other sectors of the economy using the intersectoral balance method based on "input-output" tables.Purpose of the study is to analyze Japan's economic policy in managing budgetary health care costs.The comprehensive statistical, comparative and retrospective analysis of available data was applied.The study results permit to suggest that high provision of the Japan population with hospital care resources and low mortality rates in 2022 prior to development of vaccines and effective treatment schemes for COVID-19 can be explained, among other things, by long-term policy of managing health care costs using assessment of their effect on production growth, demand and employment in other economy sectors using intersectoral balance method based on regular compilation of "input-output" tables.The data obtained permits to characterize as promising approach of the Japanese government to management of health care costs using assessment of their effect on production growth, demand and employment in other sectors of the economy using intersectoral balance method based on the regular compilation of "input-output" tables. This approach permitted to increase up to 1.5 times health care costs during 2005-2018 in situation of chronic stagnation of the national economy and thus to avoid world-wide trend towards reduction of hospital bed stock and after the start of pandemic severe shortage of hospital beds. The positive experience of Japan is confirmed by encouraging results of 2 pilot projects in the EU countries on applying the intersectoral balance method to assess the multiplier effect of health care costs in 2017-2018. It is considered that using the experience of Japan in managing budgetary health care expenditures through intersectoral balance method is challenging.

Economic exposure to regional value chain disruptions: evidence from Wuhan's lockdown in China

Production fragmentation across multiple regions can result in a regional shock propagating along value chains to a wider array of regions. We propose a methodological framework to measure the economic exposure to regional value chain disruptions due to city lockdown during Covid-19. The exposure index is evaluated by applying a hypothetical extraction method to a regionally extended inter-country input-output framework incorporating China's interregional input-output table. Our methodology can be adapted to conduct disaster impact analyses at city, state and country levels. It provides a tool for the immediate assessment of the economic risks of value chain disruptions, enabling quick policy responses.

Heterogeneity of technological structures between EU countries: An application of complex systems methods to Input-Output Tables

The identification of the channels through which a given shock spreads to the rest of the economy, determining its final impact, is essential to formulate effective policy interventions. Input-output tables (IOTs) are widely used to detect the network of intersectoral relations of a country - i.e., its sectoral technological structure or domestic supply chains - and the role of different sectors in the propagation of a shock. However, the heterogeneity that characterize the technological structures of different countries is inevitably a source of complexity for the development of supranational and timely coordinated policies because it requires to analyse and interpret a large amount of information. This paper proposes a unique problem setting that aims to deal with this complexity by facilitating the analysis and visualization of similarities and differences among the technological structures of countries, relying on the identification of a small number of archetypes and showing how their interpretation could be exploited to support the definition of coordinated policy interventions. Specifically, non-negative matrix factorization is used to extract the archetypal matrices of the technological structures of the 28 European countries from IOTs, revealing dense intersectoral relationships and a low degree of heterogeneity between them. Then, random walk indicators are applied to study shock propagation within these archetypes, uncovering sectoral centralities. Finally, COVID-19 lockdown restrictions are analysed to exemplify the use of the proposed approach for coordinated policy action.

Sectoral Spillovers Across Space and Time

We examine the spillovers from sectoral shocks across sectors, countries, and over time. Using a large cross-country sample from 1995 to 2014 with detailed sectoral information, we show that supply and demand shocks propagate upstream and downstream in the production and distribution network, both domestically and abroad. We estimate substantial domestic sectoral spillovers in our global sample, and find foreign spillovers to be sizeable as well. We document a persistent effect of negative shocks, especially supply shocks coming from the same sector, on a sector's share in aggregate gross value added in a country. We also illustrate our results by quantifying the significant role spillovers played in amplifying the sectoral shocks associated with the COVID-19 pandemic. Our findings have implications for the design of policies with a sectoral dimension, such as the allocation of sector-specific public investment.

Policy responses to COVID-19 pandemic waves: Cross-region and cross-sector economic impact.

This paper proposes a modelling approach to assess the cross-region and cross-sector economic impacts of the restrictions imposed by governments to contain the COVID-19 pandemic. The nationwide lockdown imposed in Italy during the first wave of the pandemic is used as a benchmark. However, the adopted approach allows an ex-ante assessment of alternative policy responses, in the event of successive pandemic waves, in order to rationalise the policy intervention and reach the best possible compromise between containing the risk of contagion and reducing economic losses. The used approach consists of a non-linear programming model based on a multiregional Input-Output (I-O) table, which guarantees greater flexibility than traditional I-O analysis. It is applied to estimate both direct and indirect losses of GDP and employment produced by alternative policy responses represented by general and differentiated lockdowns. The evidence deriving from the Italian experience shows a sort of learning process through successive waves based on the introduction of increasingly flexible and tailored policy responses to the pandemic.