Abstract
Limited literature studies the economic effects of the Belt and Road Initiative considering the rising trend of fragmented production. By distinguishing between intermediates and final goods in a general equilibrium model and estimating asymmetric trade costs, we quantify the economic impacts of the initiative. We find that the Belt and Road Initiative has welfare gains worldwide especially for Malaysia and Vietnam. China, the initiative's proponent, has moderate welfare gains. Some non-members experience slight welfare loss, such as 0.008% for Germany. The initiative's trade effects are more pronounced in final goods than intermediates. To figure out the direction of value-added, we distinguish the perspective of forward- (as a supply-side for sales) and backward-linkages (as a demand-side for use). Furthermore, members of the initiative participate more in GVCs at both forward- and backward-linkage. The change in the GVC position index reveals that the initiative reshapes members' positions in production chains. Both forward- and backward-linkage production lengths within members become longer, implying more complex chains and tighter linkages between members. Counterfactuals show that if Germany were to join the initiative, it would yield improved economic effects for itself and its members. Additionally, we employ more counterfactuals to demonstrate the role of asymmetric trade costs, input-output linkages, and industry heterogeneity. Through quantification of the initiative, we aim to provide insights for policymakers from the perspective of global value chains.
JEL Classification：D5, F10, F11, F13, F14, F17