International propagation of economic shocks through global supply chain

This study examines whether and how economic shocks from natural disasters propagate through global supply chains to regions not directly hit by disasters. Although such propagation within a country has been studied, this study contributes to the literature by incorporating international propagation.

Using firm-level data that include information on supply-chain ties among major firms in the world, the study finds evidence of intra-national propagation, but no international propagation. It further investigates possible mechanisms, finding that internationalised firms’ ability to substitute for damaged partners most likely explains the absence of international propagation.

Professor Yasuyuki Todo is at the Graduate School of Economics, Faculty of Political Science and Economics, Waseda University.