Supply Chain Resilience: Should Policy Promote International Diversification or Reshoring?

From Tyler Cowen.

"Little is known about optimal policy in the face of global supply chain disruptions. Should governments promote resilience by subsidizing backup sources of input supply in multiple countries? Should they encourage firms to source from safer domestic suppliers? We address these questions in a model of production with a critical input and exogenous risks of supply disturbances. With constant elasticity of substitution preferences, a subsidy for diversification achieves the constrained social optimum. When the demand elasticity rises with price, private investments in resilience may be socially excessive and the social planner may wish to discourage diversification while favoring sourcing from abroad.

That is forthcoming from the JPE by Grossman, Helpman, and Lluillier.  On general point here is that the usual arguments for protectionism, namely securing national supply chains, often actually stand as arguments for more trade, namely trade with a more diverse set of nations."