Supply Chain Disruptions: Evidence from the Great East Japan Earthquake

46 Pages Posted: 5 Jan 2017

See all articles by Vasco M. Carvalho

Vasco M. Carvalho

Universitat Pompeu Fabra/CREI; Centre for Economic Policy Research (CEPR); University of Cambridge

Makoto Nirei

University of Tokyo - Graduate School of Economics

Yukiko Saito

早稲田大学; Waseda University - School of Political Science and Economics; Research Institute of Economy, Trade and Industry (RIETI)

Alireza Tahbaz-Salehi

Northwestern University - Kellogg School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: December 3, 2016

Abstract

Exploiting the exogenous and regional nature of the Great East Japan Earthquake of 2011, this paper provides a systematic quantification of the role of input-output linkages as a mechanism for the propagation and amplification of shocks. We document that the disruption caused by the earthquake and its aftermaths propagated upstream and downstream supply chains, affecting the direct and indirect suppliers and customers of disaster-stricken firms. We then use our empirical findings to obtain an estimate for the overall macroeconomic impact of the shock by taking these propagation effects into account. We find that the propagation of the shock over input-output linkages can account for a 1.2 percentage point decline in Japan’s gross output in the year following the earthquake. We interpret these findings in the context of a general equilibrium model that takes the firm-to-firm linkages into account explicitly.

Suggested Citation

Carvalho, Vasco M. and Nirei, Makoto and Saito, Yukiko and Tahbaz-Salehi, Alireza, Supply Chain Disruptions: Evidence from the Great East Japan Earthquake (December 3, 2016). Becker Friedman Institute for Research in Economics Working Paper No. 2017-01. Available at SSRN: https://ssrn.com/abstract=2893221 or http://dx.doi.org/10.2139/ssrn.2893221

Vasco M. Carvalho (Contact Author)

Universitat Pompeu Fabra/CREI ( email )

Ramon Trias Fargas, 25-27
Barcelona, 08005
Spain

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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Makoto Nirei

University of Tokyo - Graduate School of Economics ( email )

Tokyo
Japan

Yukiko Saito

早稲田大学 ( email )

1-6-1 Nishiwaseda
Shinjuku, Tokyo 169-8050
Japan
0352861213 (Phone)

Waseda University - School of Political Science and Economics ( email )

1-6-1 Nishi-Waseda
Shinjuku-ku, Tokyo 169-8050, Tokyo 169-8050
Japan

Research Institute of Economy, Trade and Industry (RIETI) ( email )

1-3-1 Kasumigaseki
Chiyoda-ku
Tokyo 100-8901
Japan

Alireza Tahbaz-Salehi

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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