TY - JOUR
T1 - Firm-level propagation of shocks through supply-chain networks
AU - Inoue, Hiroyasu
AU - Todo, Yasuyuki
N1 - Funding Information:
This research was conducted as part of a project entitled ‘Large-scale Simulation and Analysis of Economic Network for Macro Prudential Policy,’ undertaken at the Research Institute of Economy, Trade, and Industry. This research was also supported by MEXT as Exploratory Challenges on Post-K computer (Studies of Multi-level Spatiotemporal Simulation of Socioeconomic Phenomena). The authors thank H. Aoyama, N. Ito, Y. Fujiwara, other members of Exploratory Challenges on Post-K computer, S. Hallegatte, M. Yano and seminar participants at RIETI and the World Bank for helpful comments. The authors are also grateful for the financial support of JSPS Kakenhi Grant Nos. 15K01217, 18K04615, 18H03642 and 25101003. The opinions expressed and arguments employed herein do not necessarily reflect those of RIETI, University of Hyogo, Waseda University, or any institution with which the authors are affiliated.
Publisher Copyright:
© 2019, The Author(s), under exclusive licence to Springer Nature Limited.
Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.
PY - 2019/9/1
Y1 - 2019/9/1
N2 - Social and economic networks can be a channel of negative shocks and thus deteriorate resilience and sustainability in societies. This study focuses on supply chains, or supplier–customer networks of firms and examines how these supply chains enable production losses caused by natural disasters to propagate and persist in regions not directly affected by the disaster. We apply an agent-based model to the actual supply chains of nearly one million firms in Japan to estimate the direct and indirect effects of the 2011 Great East Japan earthquake. We then employ the same model to predict the effect of the Nankai Trough earthquake, a mega earthquake predicted to hit major industrial cities in Japan in the near future. We find that the indirect effects of the disasters on production due to propagation (10.6% of gross domestic product in the case of the Nankai earthquake) are substantially larger than their direct effects (0.5%). Our simulation analyses to compare the actual network with hypothetical networks suggest that these indirect effects are more prominent and persistent when supply chains are characterized by scale-free properties, difficulty in substitution among intermediate products, and complex cycles in networks.
AB - Social and economic networks can be a channel of negative shocks and thus deteriorate resilience and sustainability in societies. This study focuses on supply chains, or supplier–customer networks of firms and examines how these supply chains enable production losses caused by natural disasters to propagate and persist in regions not directly affected by the disaster. We apply an agent-based model to the actual supply chains of nearly one million firms in Japan to estimate the direct and indirect effects of the 2011 Great East Japan earthquake. We then employ the same model to predict the effect of the Nankai Trough earthquake, a mega earthquake predicted to hit major industrial cities in Japan in the near future. We find that the indirect effects of the disasters on production due to propagation (10.6% of gross domestic product in the case of the Nankai earthquake) are substantially larger than their direct effects (0.5%). Our simulation analyses to compare the actual network with hypothetical networks suggest that these indirect effects are more prominent and persistent when supply chains are characterized by scale-free properties, difficulty in substitution among intermediate products, and complex cycles in networks.
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U2 - 10.1038/s41893-019-0351-x
DO - 10.1038/s41893-019-0351-x
M3 - Article
AN - SCOPUS:85070817361
VL - 2
SP - 841
EP - 847
JO - Nature Sustainability
JF - Nature Sustainability
SN - 2398-9629
IS - 9
ER -