The Hubei lockdown and its global impacts via supply chains

Abstract

This article argues that the lockdown of Hubei province in China due to the Coronavirus outbreak provides a natural experiment to study the importance of China's role in global value chains. Since the lockdown started during the Lunar New Year, Hubei's migrant workers who went home could not return to workplaces in other provinces, resulting in a massive labor supply shock. I feed the supply shock through a Ricardian model with intermediate goods and sectoral linkages to study trade and welfare effects across several economies. While welfare in China is the most negatively affected, the shock also has sizeable negative implications for the US and the UK.