Bosker, M. and Westbrock, B. (2024). The network origins of the gains from trade Journal of Economic Theory, 216:.

This paper develops a network perspective on the gains from trade in today's international supply chains. In particular, we demonstrate that the comparative statics predictions of a standard general-equilibrium trade model with input-output linkages can be expressed as a network diffusion model. This model captures the relevant dimensions of the production network's structure by just two easily quantifiable statistics: A country's upstream exposure to supply shocks further up in the network and its downstream exposure to demand shocks further down. We then show how up- and downstream exposure crucially determine the welfare effects from various types of trade cost shocks. In some cases, they even capture the entire welfare effect.