Global Sourcing in the Wake of Disaster: Evidence from the Great East Japan Earthquake

While global sourcing by multinational firms has changed the landscape of international trade, little is known as to how firms alter their global sourcing pattern when facing uncertainty or negative shocks. In this paper, we use the Great East Japan Earthquake as an exogenous shock to identify the macro fluctuation on firms' offshoring. Using Japanese firm-level data from 2010-2013, we show that the earthquake increases offshoring in terms of yen value. By decomposing total offshoring into goods and service offshoring, we find the positive effect of earthquake is statistically significant for manufacturing offshoring, but not for service offshoring.