This paper investigates the causal effect of global value chain (GVC)-related trade on the
German labor market during the COVID-19 crisis, using a difference-in-differences approach
combined with entropy balancing. The analysis of monthly establishment-level data from
January 2019 to December 2021 shows that a one standard deviation increase in
GVC-related trade with China leads to an increase in short-time work of up to 27 percentage
points, with significant positive effects observed from May to October 2020. For this period,
the regression results imply that a one standard deviation increase in GVC integration gives
rise to an additional expenditure on short-time work of around 7.3 billion euros. In contrast,
GVC-related trade with the whole world as a trading partner does not show a significant
impact. Additional survey data support these findings, suggesting that establishments that
are more GVC-integrated with China face more difficulties in obtaining inputs or dealing
with suppliers in 2020.
IAB-Discussion Paper 10/2024: Labor Market Impact of Disruptions in Global Value Chains
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