Working Paper: CEPR ID: DP17855
Authors: Rikard Forslid; Mark Sanctuary
Abstract: We study how the catastrophic 2011 Thailand flood affected Swedish firms that imported from Thailand. Output by exposed firms dropped by 8% in 2012. In aggregate, this translates into a 1.08 billion SEK drop in Thai imports for these firms, which translated into over 29.7 billion SEK in lost sales. The magnitude of the amplification effect is striking. The effects of the flood did not go away in spite of the relatively rapid recovery in Thai production, which is consistent with substantial fixed costs in establishing links in supply networks. Another key result is the importance of geographical diversification in a value chain. Finally, we find very weak evidence of re-shoring
Keywords: global value chains; climate shocks; extreme weather
JEL Codes: F14; Q54
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| 2011 Thailand flood (Q54) | decline in Thai imports by Swedish firms (F14) |
| decline in Thai imports by Swedish firms (F14) | decrease in sales for affected firms (F61) |
| 2011 Thailand flood (Q54) | 108 billion SEK decrease in imports for affected firms in 2012 (F69) |
| decline in Thai imports by Swedish firms (F14) | persistence of effects through 2013 (C41) |
| larger firms (L25) | smaller decline in Thai imports (F14) |
| geographical diversification (R12) | insulation from shock (G52) |
| inability to source from Thailand (F69) | cancellation of orders of complementary goods (D10) |