Global Supply Chain: Towards a Computable General Equilibrium Analysis

Abstract

Economists have analysed GSCs using pure theory, econometrics and input–output calculations. We now need a new type of CGE model to show how GSC trade affects welfare and its distribution between and within nations. The new model must recognise: fragmentation of production; scale economies; intermediate inputs that cross national borders multiple times embodied in products at different stages of completion; and decision-making by global agents. We describe a prototype that incorporates these features and gives interpretable results not attainable with a standard CGE model. We discuss steps to move from the prototype to a policy-relevant model.