Modeling Loss-Propagation in the Global Supply Network: The Dynamic Agent-Based Model Acclimate

50 Pages Posted: 23 Dec 2016 Last revised: 16 Oct 2017

See all articles by Christian Otto

Christian Otto

Potsdam Institute for Climate Impact Research (PIK)

Sven Willner

Potsdam Institute for Climate Impact Research (PIK)

Leonie Wenz

Potsdam-Institut für Klimafolgenforschung (PIK)

Katja Frieler

Potsdam-Institut für Klimafolgenforschung (PIK)

Anders Levermann

Potsdam Institute for Climate Impact Research; Columbia University - Columbia Earth Institute

Date Written: August 1, 2017

Abstract

World markets are highly interlinked and local economies extensively rely on global supply and value chains. Consequently, local production disruptions, for instance caused by extreme weather events, are likely to induce indirect losses along supply chains with potentially global repercussions. These complex loss dynamics represent a challenge for comprehensive disaster risk assessments. Here, we introduce the numerical agent-based model acclimate designed to analyze the cascading of economic losses in the global supply network. Using national sectors as agents, we apply the model to study the global propagation of losses induced by stylized disasters. We find that indirect losses can become comparable in size to direct ones, but can be efficiently mitigated by warehousing and idle capacities. Consequently, a comprehensive risk assessment cannot focus solely on first-tier suppliers, but has to take the whole supply chain into account. To render the supply network climate-proof, national adaptation policies have to be complemented by international adaptation efforts. In that regard, our model can be employed to assess reasonable leverage points and to identify dynamic bottlenecks inaccessible to static analyses.

Keywords: Disaster Impact Analysis, Higher-Order Effects, Economic Network, Resilience, Dynamic Input-Output Model, Agent-Based Modeling

JEL Classification: F100, F180, Q540, Q560

Suggested Citation

Otto, Christian and Willner, Sven and Wenz, Leonie and Frieler, Katja and Levermann, Anders, Modeling Loss-Propagation in the Global Supply Network: The Dynamic Agent-Based Model Acclimate (August 1, 2017). Journal of Economic Dynamics and Control, 83, 232-269., Available at SSRN: https://ssrn.com/abstract=2888904 or http://dx.doi.org/10.2139/ssrn.2888904

Christian Otto (Contact Author)

Potsdam Institute for Climate Impact Research (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Sven Willner

Potsdam Institute for Climate Impact Research (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Leonie Wenz

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Katja Frieler

Potsdam-Institut für Klimafolgenforschung (PIK) ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Anders Levermann

Potsdam Institute for Climate Impact Research ( email )

Telegrafenberg 31
Potsdam, Brandenburg 14473
Germany

Columbia University - Columbia Earth Institute ( email )

314 Low Library
535 West 116th Street, MC 4327
New York, NY 10027
United States

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