This paper evaluates the extent to which the world economy has entered a phase of de-globalisation, and it offers some speculative thoughts on the future of global value chains in the post-COVID-19 age. Although the growth of international trade flows relative to that of GDP has slowed down since the Great Recession, this paper finds little systematic evidence indicating that the world economy has already entered an era of de-globalisation. Instead, the observed slowdown in globalization is a natural sequel to the unsustainable increase in globalization experienced in the late 1980s, 1990s and early 2000s. I offer a description of the mechanisms leading to that earlier expansionary phase, together with a discussion of why these forces might have run out of steam, and of the extent to which they may be reversible. I conclude that the main challenge for the future of globalisation is institutional and political in nature rather than technological, although new technologies might aggravate the trends in inequality that have created the current political backlash against globalisation. Zooming in on the COVID-19 global pandemic, I similarly conclude that the current health crisis may further darken the future of globalisation if it aggravates policy tensions across countries.
We exploit plausibly exogenous geographical variation in the reduction in domestic demand caused by the Great Recession in Spain to document the existence of a robust, within-firm negative causal relationship between demand-driven changes in domestic sales and export flows. Spanish manufacturing firms whose domestic sales were reduced by more during the crisis observed a larger increase in their export flows, even after controlling for firms' supply determinants (such as labor costs). This negative relationship between demand-driven changes in domestic sales and changes in export flows illustrates the capacity of export markets to counteract the negative impact of local demand shocks. We rationalize our findings through a standard heterogeneous-firm model of exporting expanded to allow for non-constant marginal costs of production. Using a structurally estimated version of this model, we conclude that the firm-level responses to the slump in domestic demand in Spain could well have accounted for around one-half of the spectacular increase in Spanish goods exports (the so-called `Spanish export miracle') over the period 2009-13.
This paper characterizes the transitional dynamics of the savings rate in the neoclassical growth model. I start with a general formulation with weak assumptions on preferences and technology and go on to fully describe the transitional behavior of the savings rate under particular functional forms. It is shown that under plausible functional forms for preferences and technology, the model is able to explain the hump-shaped behavior of the savings rate observed in most OECD countries in the period 1950-1990. The paper also provides econometric evidence supporting the empirical relevance of the neoclassical growth model in explaining the dynamics of the savings rate both in OECD countries and in a larger cross-section of countries.