Global Impacts of the Automotive Supply Chain Disruption Following the Japanese Earthquake of 2011

Abstract

This paper provides an input–output method to estimate worldwide economic impacts generated by supply chain disruptions. The method is used to analyse global economic effects due to the disruptions in the automotive industry that followed the Japanese earthquake and the consequent tsunami and nuclear crisis of March 2011. By combining a mixed multi-regional input–output model, the World Input–Output Database and data at the factory level, the study quantifies the economic impacts of the disruptions broken down by country and industry. The results show that the global economic effect (in terms of value added) of this disruption amounted to US$139 billion. The most affected (groups of) countries were Japan (39%), the USA (25%), China (8%) and the European Union (7%). The most strongly affected industries were transport equipment (37%), other business activities (10%), basic and fabricated metals (8%), wholesale trade (7%) and financial intermediation (4%).

Keywords:

• Natural disasters
• Transport equipment industry
• Supply chain disruptions
• Multi-regional input–output tables
• Japan

Notes

¹The exact values of b₁, b₂ and b₃ are not relevant for our analysis.

²These equations can be generalized to a context with m sectors and n countries. Moreover, the number of supply-constrained sectors can also be expanded.

³Note that these cascading effects refer to impacts due to the reduction in the intermediate inputs of the sectors affected due to the disruption of the supply chain and, therefore, can also be considered as backward impacts.

⁴Note that this assumption ignores the effects of the supply chain disruption on other sectors different from the TEI. However, as we show in the discussion, this impact can be considered negligible.

⁵Note that the SCD-BD and SCD-BI also include the backward impacts on the sector that originally suffered the shock. This allow us to compute the impact in the Japanese TEI companies supplying components to the non-Japanese TEI that are indirectly affected by the disruption on the supply of key components produced by other Japanese TEI companies.

⁶Robinet (2011) reports detailed data until 3 June 2011. These data have been up-scaled to match the total cumulative losses estimated by the author until September 2011.

⁷The figures shown in column 6 of Table 2 constitute the exogenous shocks applied to Equation 10.