How do natural disasters affect supply chains long term?

  • The immediate consequences of natural disasters for global value chains are well-documented.
  • But little is known about the longer term consequences.
  • Four economists explore the long-term impact of the 2011 earthquake in Japan on auto and electronics supply chains data on imports.
  • They found imports shifted to new suppliers, especially in products where dependence on Japan was greater.
  • They predict that this pattern of switching may be relevant to the COVID-19 pandemic.

COVID-19 has disrupted global value chains (GVCs). Some observers expect firms to respond by abandoning their pursuit of lower production costs in favour of building stronger resilience in production – by reshoring, nearshoring, and/or diversifying sources of production (e.g. Javorcik 2020, Kilic and Marin 2020, Lund et al. 2020, UNCTAD 2020). In contrast, others have argued that the same technological and institutional factors…

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