## Supply Chain Diversification and Resilience

_IMF Working Papers, May 23, 2025_

## Source details

**Canonical URL:** [Supply Chain Diversification and Resilience](https://www.imf.org/en/publications/wp/issues/2025/05/23/supply-chain-diversification-and-resilience-567065)

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## Bibliographic details
- Authors: JaeBin Ahn, Brandon Joel Tan
- Published: May 23, 2025
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9798229011419.001

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### Model and approach
- Develops a new multi-country and multi-sector general equilibrium trade model to analyze the extent to which the diversification of sources of imports mitigates the impact of adverse trade shocks.
- Model incorporates trade network rigidities arising from frictions in goods, labor, and local factor markets.
- Emphasizes that countries cannot immediately reconfigure supply chains in response to shocks, creating a trade-off between resilience and efficiency.

### Key findings
- Supply chain diversification can potentially improve resilience, at the cost of efficiency.
- Quantifying the resilience-efficiency trade-off suggests that diversifying the sources of targeted imports can enhance expected welfare when the probability of a large trade shock is sufficiently high.
- Targeted imports are characterized as:
  - those more exposed to shocks,
  - positioned upstream in the supply chain,
  - and subject to greater rigidities.

### Policy implications and recommendations
- Diversification policies should focus on targeted imports that are upstream, more exposed to shocks, and face greater market rigidities to maximize welfare gains relative to efficiency losses.
- The welfare benefits of diversification depend on the probability of large trade shocks; higher probabilities increase the attractiveness of diversification despite efficiency costs.

### Publication and metadata
- Authors: JaeBin Ahn, Brandon Joel Tan
- Date: May 23, 2025
- Series: IMF Working Papers
- Working Paper No.: 2025/102
- Pages: 60
- Volume: 2025
- Issue: 102
- DOI: https://doi.org/10.5089/9798229011419.001
- Stock No: WPIEA2025102
- ISBN: 9798229011419
- ISSN: 1018-5941
- Subjects: Economic theory, Imports, International trade, Labor, Labor mobility, Supply shocks, Tariffs, Taxes
- Keywords: Caribbean, Diversification, diversification of source, equilibrium trade model, Global, Imports, Labor mobility, resilience-efficiency trade-off, supply chain diversification, Supply Chains, Supply shocks, Tariffs, Trade, trade network rigidity

*IMF Working Paper — "Supply Chain Diversification and Resilience" (Working Paper No. 2025/102) by JaeBin Ahn and Brandon Joel Tan, May 23, 2025.*

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_Source: https://www.imf.org/en/publications/wp/issues/2025/05/23/supply-chain-diversification-and-resilience-567065_