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Using difference-in-difference analysis in a gravity model, we examine the response of GVC-trade to two previous health shocks, SARS and MERS. Our estimates show a decline in GVC-trade, both gross and value-added, from SARS-induced supply and demand shocks, though a similar finding is not observed for MERS. There is suggestive evidence for “reshoring” and “near-shoring” in the stylized facts on SARS while empirical analysis points to MERS being associated with geographical diversification and widening of value chains. The adverse effects of SARS are found to get accentuated over time suggesting that the associated value-chains were non-resilient to that shock. The findings are observed at both the intensive (value) and extensive (number of products) margins and for both GVC-based intermediate and final goods. The SARS results are driven by non-OECD countries that were also more downstream in GVCs, while more competitive exporters, differentiated intermediates and technology-intensive products were relatively insulated.
