Economic Resilience of the Firm: A Production Theory Approach

43 Pages Posted: 27 Sep 2017 Last revised: 1 Apr 2018

See all articles by Noah Dormady

Noah Dormady

Ohio State University (OSU), John Glenn College of Public Affairs

Alfredo Roa-Henriquez

Ohio State University (OSU), John Glenn School of Public Affairs

Adam Rose

University of Southern California - Sol Price School of Public Policy

Date Written: March 26, 2018

Abstract

As a result of catastrophic events, firms and other organizations are faced with input shortages and price shocks. Firms can respond to these events using a variety of “resilience” actions, or tactics. Here we provide a microeconomic foundation for analyzing a comprehensive range of these tactics, incorporating both inherent and adaptive concepts of resilience. We classify these tactics and derive optimality conditions for production with the use of each class of resilience in the context of a nested Constant Elasticity of Substitution (CES) function consisting of aggregated Capital (K), Labor (L), Infrastructure (I), and Materials (M). The framework has broad applicability, including measurement and scoring of resilience, cost-effectiveness assessment of resilience tactics individually and as a group, calculation of resilience indices, and supply-chain management.

Keywords: Economic Resilience; Production Theory; Inherent and Adaptive Resilience; Disasters

JEL Classification: D2, L29, L39, M21, Q54

Suggested Citation

Dormady, Noah and Roa-Henriquez, Alfredo and Rose, Adam, Economic Resilience of the Firm: A Production Theory Approach (March 26, 2018). Available at SSRN: https://ssrn.com/abstract=3042815 or http://dx.doi.org/10.2139/ssrn.3042815

Noah Dormady (Contact Author)

Ohio State University (OSU), John Glenn College of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Alfredo Roa-Henriquez

Ohio State University (OSU), John Glenn School of Public Affairs ( email )

110 Page Hall
1810 College Road
Columbus, OH 43210
United States

Adam Rose

University of Southern California - Sol Price School of Public Policy ( email )

Los Angeles, CA 90089-0626
United States

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