Natural Disasters and the Reshaping of Global Value Chains

ABSTRACT

To understand the longer-term consequences of natural disasters for global value chains, this paper examines trade in the automobile and electronic sectors after the 2011 earthquake in Japan. Contrary to widespread expectations, we find that the shock did not lead to reshoring, nearshoring, or diversification across non-Japanese suppliers;and trade in intermediate products was disrupted less than trade in final goods. Imports did shift to new suppliers, especially where dependence on Japan was greater. But production relocated to developing countries rather than to other top exporters, and to larger countries. The results, showing relative inertia in intermediate goods and the dominance of economic fundamentals (cost and scale) in determining sourcing decisions, may help us understand supply chain adjustment after other natural disasters, like the COVID-19 pandemic. [ FROM AUTHOR] Copyright of IMF Economic Review is the property of Macmillan Publishers Ltd. and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full . (Copyright applies to all s.)