Global value chains (GVCs) are the backbones of our economy, linking resources to consumers and spreading innovations worldwide. However, GVCs have been heavily disturbed in the past few years. Natural disasters, pandemic-induced restrictions, and geopolitical tensions have generated disruptions, contributing to inflation unseen for decades. Globalization may have reached a tipping point of global integration; new technologies and climate-related policies are expected to reshape GVCs. How are GVCs expected to restructure, and how will they impact Austria? This project aims to deliver quantified estimates of future GVCs considering three macro trends: geopolitical decoupling, decarbonization policies, and digitalization. It will analyze the position of Austria in these restructured GVCs and assess their implications for sectoral composition, job markets, and competitiveness. It will also investigate the impacts of these trends on resilience and identify Austria’s vulnerabilities.
© Image by Freddy from Pixabay
The main research questions are the following.
1. What changes in the structure of GVCs can be expected in two, five, and ten years, considering three macro trends: geopolitical decoupling, decarbonization policies, and digitalization?
2. In these pathways, how will Austrian sectors be affected in terms of cost structure, imports and exports, labor market, and investment needs?
3. Will the Austrian economy be more or less resilient to supply chain disruptions?
First, we will develop and validate a global macroeconomic agent-based model (ABM). Using the best available data and assumptions, we will quantify the parameter changes that reflect the three macro trends and apply the model to estimate future pathways of GVCs with a 10-year horizon. Next, we will identify the salient features of each GVC pathway with a focus on Austria. Last, for each pathway, we will use a global supply-chain model to assess the resilience of the Austrian economy to supply-chain shocks.
GVCs have been heavily disturbed in the past few years and will be even more in the coming years. We need novel approaches to grasp their macroeconomic and geopolitical implications.
We will develop a simplified and global version of the IIASA macroeconomic ABM (Poledna et al. 2023), the first ABM to compete with standard models in out-of-sample forecasting. Using Eurostat's FIGARO tables, we will extend it to EU countries and main trading partners.
The model will simulate five future GVC pathways, which describe how trade flows between countries and sectors change over time. Each pathway results from different combinations of the three macro trends, modeled by data-informed parameter changes. Statistics and network analysis will be used to analyze the pathways and Austria’s position.
Last, we will extend Colon et al. (2021)’s supply chain model into a global one, calibrated with the estimated GVC pathways. This model simulates the propagation of a disruption—e.g., production drop in one country—along supply chains via shortages and price adjustments. We will perform a stress test to map Austria’s vulnerabilities to foreign supply chain disruptions.
This four-year project is funded by the Oesterreichische Nationalbank (OeNB) through the Anniversary Fund.
Celian Colon
Peter E. DeJanosi Postdoctoral Research Scholar (EM, CDAT)
Alex Crescentini
Research Scholar (EM)
Luca Fierro
Research Scholar (EM)
Sebastian Poledna
Research Group Leader and Senior Research Scholar (EM)