Measuring changes in international production from a disruption: Case study of the Japanese earthquake and tsunami

The earthquake and tsunami that struck Japan on March 11, 2011 caused a tremendous loss of life and property. The disaster also disrupted global supply chains, which was blamed for anemic growth in the global economy. A multiregional input-output model can quantify the international impacts on production due to changes in demand from companies reducing their orders because of a disruption. Using the input-output model to conceptualize a supply chain, we present a unique method for calculating indirect production losses caused by disabled production facilities. Methods for calculating the possible transfer of demand to industries in other countries are also discussed. We apply the multiregional input-output model to the Japanese earthquake and tsunami. Comparing results generated by Japanese consumer sales with those generated by Japanese production data reveals that Japanese demand was satisfied by other countries and that inventory in the production pipeline likely allowed consumer sales to remain strong. (C) 2012 Elsevier B.V. All rights reserved.