Firm-level Simulation of Supply Chain Disruption Triggered by Actual and Predicted Earthquakes

         
Author Name INOUE Hiroyasu (University of Hyogo) / TODO Yasuyuki (Faculty Fellow, RIETI)
Creation Date/NO. March 2018 18-E-013
Research Project Large-scale Simulation and Analysis of Economic Network for Macro Prudential Policy
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Abstract

This paper reports simulations of supply chain disruptions regarding the Great East Japan Earthquake and the predicted Nankai Trough Earthquake. The simulations are based on the actual nationwide supply chains of Japan and on an agent-based model. As a result, we obtain the following findings. (1) Based on simulations of the Great East Japan Earthquake, we calibrate the parameters in the model. The result shows that the simulation reproduces the aftermath of the disaster well, which means the simulation captures the propagations of the damages and the recoveries on supply chains. (2) Indirect damages of both earthquakes geographically permeate the entire country in quite a short term. Additionally, the damages to firms show synchronized fluctuations due to the network structure. (3) Simulations of the Nankai Trough Earthquake show that direct damages are 12 times greater than those from the Great East Japan Earthquake, but indirect damages are approximately 4.5 times greater in a year. (4) By estimating indirect damage triggered by a single firm loss, approximately 10% of firms cause more than 10% of the damage of the entire supply chains.