Inputs in distressgeoeconomic fragmentation and firms’ sourcing

  1. Panon, Ludovic 1
  2. Lebastard, Laura 2
  3. Mancini, Michele 1
  4. Borin, Alessandro 1
  5. Caka, Peonare 3
  6. Cariola, Gianmarco 1
  7. Essers, Dennis 4
  8. Gentili, Elena 1
  9. Linarello, Andrea 1
  10. Padellini, Tullia 1
  11. Requena, Francisco 5
  12. Timini, Jacopo 6
  1. 1 Bank of Italy
  2. 2 European Central Bank
  3. 3 Bank of Slovenia
  4. 4 National Bank of Belgium
  5. 5 Universitat de València
    info

    Universitat de València

    Valencia, España

    ROR https://ror.org/043nxc105

  6. 6 Banco de España
    info

    Banco de España

    Madrid, España

    ROR https://ror.org/02f26yq04

Show affiliations +
Journal:
Documentos de trabajo - Banco de España

ISSN: 0213-2710

Year of publication: 2024

Issue: 36

Type: Working paper

DOI: 10.53479/37834 DIALNET GOOGLE SCHOLAR lock_openOpen access editor

More publications in: Documentos de trabajo - Banco de España

Sustainable development goals

Abstract

We study how disruptions to the supply of foreign critical inputs (FCIs)—inputs primarily sourced from extra-EU countries with highly concentrated supply, advanced technology products or inputs which are key to the green transition —may affect value-added at different levels of aggregation. Using firm-level customs and balance sheet data for Belgium, France, Italy, Slovenia and Spain, our framework allows us to assess how geoeconomic fragmentation may affect European economies differently. Our baseline calibration suggests that a 50% reduction in imports of FCIs from China and other countries with a similar geopolitical orientation would result in sizable value-added losses with significant heterogeneity across firms, sectors, regions and countries, driven by the heterogeneous exposure of firms. Our findings show that the short-term costs of supply disruptions of FCIs can be substantial, especially if firms cannot easily switch away from these inputs.

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