Restructuring Production Chain with Industrial Network and Cluster after the COVID-19 Pandemic 

Abstract: After the 2020 pandemic, the whole world will look remarkably different with the consideration of global supply chain. This paper develops a general equilibrium model with endogenous industrial cluster and endogenous industrial network of division of labour to formalize and explore the interrelationship and rules of industrial cluster, network of division of labour, the economies of specialization and agglomeration under the new era of post-pandemic global economy. The model suggests that institutional efficiency of mutual-trust, and competition among countries and industries will facilitate important circular effects, which propelling and shaping the arrangement and allocation of industrial clusters, the position located at the supply chain, and consequently the status of economic growth. In particular, the improvements in institutional efficiency of mutual-trust over economic and technology systems will expand the demand for transactions and network size, which in turn will determine the development of cluster and network scope, as well as the position at the network.

Key words: industrial network; industrial cluster; specialization; division of labour; infra-marginal analysis; production chain; institutional efficiency of mutual-trust