Economic impacts of globalisation

Value chains and domestic competitiveness

With international trade increasingly undertaken within vertically fragmented supply chains, this paper considers the impact of changes in trade costs on domestic output. In the context of the UK’s exit from the EU we show that the negative impact on UK output will depend on changes in both domestic and export competitiveness. Since for many firms the majority of their sales are to the domestic market, the domestic competitiveness impact may be quantitatively more important.