The global trade flows before COVID
During the last 40 years the share of world income spent on services, as opposed to the share spend on goods, has been increasing exerting a significant drag on global trade growth. Lewis and al. use a general-equilibrium model which incorporates comparative advantage, non-homothetic preferences, and an input output structure to quantify the impact of this structural change on global trade. Their findings include:
- The measured gains from trade with structural change are 2.4 percentage points lower in 2015 than those without structural change;
- Their model implies that the ratio of trade to expenditure would fall from 47 percent in 2015 to 38 percent in 2061;
- They warn that this decline in total trade flows should not be attributed to rising trade costs, instead it should be viewed as a consequence ongoing changes in services consumption.
Structural Change and Global Trade
Authors: Logan T. Lewis, Ryan Monarch, Michael Sposi, Jing Zhang
From: Federal Reserve Board, Southern Methodist University, Federal Reserve Bank of Chicago
Globalizing labor
Covid-19 probably made us leapfrog about a decade in realising the possibilities of decoupling work from physical presence in the workplace. Although in many activities we may, after the pandemic is over, go back to sharing physical offices, working in factory halls and so on, in many others we shall not.
This will not have an effect only on people working from home—the change will be much more profound. A global labour market will come into existence without the need for migration.
The first global event in the history of humankind
By: Branko Milanovic – Graduate Center of City University of New York
The future of globalization
In his 2018 book “The Globotics Upheaval”, Richard Baldwin put forth the idea of third unbundling i.e. the process through which digitech is making it easier for people sitting in one country to do things in offices in another country. In this commentary, Lashitew and Erumban, argue that it is precisely this virtual service delivery that will lead to greater service integration even as manufacturing becomes concentrated. This change means that:
- Services have a great potential to drive globalization in a post-COVID-19 world;
- Much of the early growth is likely to take place among middle- and higher-income countries that have complementary high-skill labor endowments, which should make service globalization politically amenable;
- Service integration can stall only if countries institute artificial legal barriers to limit it.
Could services drive globalization in the post-COVID-19 world?
By: Addisu Lashitew, Abdul Erumban – Brookings
