Hiroyasu Inoue, Yasuyuki Todo, 10 September 2019

Natural disasters can have enormous economic consequences that affect firms both directly and indirectly. Using the example of the Great East Japan Earthquake, this column investigates how the propagation of shocks varies with the characteristics of supply chains. It finds that the indirect effects are far larger than the direct effects. Shocks propagate more widely and are more persistent if supply networks have complex cycles and low input substitutability.

Marcel Fratzscher, Christoph Grosse Steffen, Malte Rieth, 17 August 2018

Does inflation targeting help absorb large shocks? This column shows that it implies higher output growth and lower inflation when countries are hit by natural disasters. Hard targeting works in these cases; soft targeting does not. This has impacts for how we evaluate the success of inflation targeting during the global crisis, but also for the debate on flexible inflation targeting.

Ayako Kondo, 21 November 2017

Economists have studied extensively the direct impacts of natural disasters on local labour markets, but less is known about the knock-on consequences for wider markets. This column argues that although supply chain disruptions caused by the Great East Japan Earthquake increased job separation and geographical shifts, the effects on employment status were weak. The long-run impact of the earthquake on the labour markets outside of the directly affected areas appears to be limited, despite public concerns at the time.

Hiroyasu Inoue, Yasuyuki Todo, 25 April 2017

Natural disasters have enormous economic consequences, with the 2011 Great East Japan Earthquake providing a particularly stark recent example. This column uses supply chain data for more than one million Japanese firms to explore how negative shocks from natural disasters propagate through firm networks. Shocks are found to propagate very quickly, due in large part to certain ‘hub’ firms that have a high number of supply chain partners. Production substitution is the key to slowing the propagation.

Lianming Zhu, Koji Ito, Eiichi Tomiura, 28 January 2017

We still know little about how firms alter their global sourcing patterns when facing uncertainty and shocks. This column uses Japanese firm-level data compiled after the Great East Japan earthquake of 2011 to show that firms in affected areas reacted immediately by offshoring more, but that this affect was significant only in the manufacturing sector. Policies to facilitate offshoring would support such emergency responses in future.

Ilan Noy, 13 March 2015

It is difficult to evaluate the economic impact of natural disasters in the absence of an established metric for measuring the total damages. This column introduces a systematic index that measures the economic cost of catastrophes as well as the human cost – the latter integrating the World Health Organisation’s measure of disability-adjusted lifeyears. Low income countries face higher costs of disasters for a variety of reasons. Some recent disasters are evaluated as case studies. 

Hirofumi Uchida, Arito Ono, 11 February 2015

It seems like natural disasters should harm the economy by destroying lives and capital. This column investigates the extent to which disasters can lead to creative destruction through ‘natural selection’ of the fittest firms. Surprisingly, the rate of closure due to bankruptcy decreases – perhaps due to aid. Firm exits following the Tohoku earthquake were predominantly voluntary closures, with firms seizing the moment in order to leave an ageing market.

Yukiko Saito, 15 December 2013

Natural disasters severely disrupt supply chains. This article presents evidence from the Great East Japan Earthquake that the spillover effects on disaster-hit firms’ suppliers were worse than those on their customers. For those firms that shut down, however, the effects on their customers were worse, and were transmitted along the supply chain. Firms with partners inside the affected area were more likely to form new business relationships, but those whose partners shut down were not. This suggests disaster relief should be targeted to the hardest-hit firms.

Masahisa Fujita, 18 November 2013

A major feature of globalisation in the last decades has been the emergence of global supply chains, especially in Asia. This column explains how supply chains may increase the risks of shock contagion across countries. It shows how the earthquake and tsunami in Japan, and the floods in Thailand had ripple effects on the Japanese automobile industry across countries. It suggests that greater international cooperation, such as the development of sister industrial clusters, is one way to mitigate the risks.

Ilan Noy, 05 September 2012

Over the last decade we have witnessed increasingly devastating natural disasters: south-east Asia, Katrina, Haiti, New Zealand, and Japan to name a few. While much of the focus is understandably on the immediate impact, this column argues that the long-term economic costs are often underestimated or even overlooked.

Stéphane Hallegatte, 14 April 2012

Earlier this week, much of Southeast Asia was stunned by an earthquake that for a moment brought back memories of the devastating tsunami of 2004. The cost of such natural disasters has been on the rise in recent years due to an increase in the number of people living and working in high-risk areas. This column explores some of the reasons behind this increase.

Jorge Andrade da Silva, Lucian Cernat, 09 February 2012

Natural disasters often hit developing countries hardest. To add to the devastating death toll, trade and development can be knocked off course. This column suggests that exports of small developing countries fall by nearly a quarter, and that this effect can be felt for up to three years. Exports of larger developing countries, on the other hand, are not significantly affected.

Hubert Escaith, Robert Teh, Alexander Keck, Coleman Nee, 28 April 2011

The consequences of the tragic disaster in Japan are many. This column examines the trade effects. It suggests that Japanese exports will fall by 0.5–1.6% and its imports will rise by 0.4–1.3%. Despite the devastation in Japan, the effects on global trade will be relatively small.

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