Measuring regional integration into global supply chains: evidence from a new dataset of Swiss cantons

Abstract

There is an increasing demand for understanding how international shocks affect regions within a country differently. We study the short-term effects of a global energy price shock on output and inflation in the Swiss cantons using input–output techniques. Our results show that the induced inflation and contraction of output are small compared to other countries, indicating that Switzerland is generally resilient to price changes of fossil fuels. This is due to the low dependence of Switzerland on oil and gas and because of the large value added share of other activities. The responses of the cantons are heterogeneous, with Ticino, Neuchâtel and Basel-Country being most affected owing to their specialization in fossil fuel-dependent sectors with strong reliance on international inputs. Although the source of the responses to the shock relates to the energy sector, the contribution of other sectors through regional international linkages is larger as a result of an intermediates’ price spiral in all cantons. The results emphasize the informational gains from data on sectoral structures and global value chain integration at the regional level.