Global Value Chains and Trade Elasticities
12 Pages Posted: 3 Jun 2014
Date Written: June 2, 2014
Previous studies have argued that global value chains (GVCs) have increased the sensitivity of trade to foreign income shocks. This may occur either because GVC trade is concentrated in durable goods industries, which are known to have high income elasticities (a composition effect), or because, within industries, GVC trade has a higher income elasticity than regular trade (a supply chain effect). Using Chinese trade data across customs regimes and industries during the period 1995-2009, we find evidence for the former, but not the latter.
Keywords: global value chains, trade elasticities, supply chain effect, composition effect
Suggested Citation: Suggested Citation