International propagation of economic shocks through global supply chains

This study examines whether and how economic shocks by natural disasters propagate through global supply chains to regions not directly hit by disasters. Although such propagation within a country has been studied, this study contributes to the literature by incorporating international propagation. Using firm-level data for more than 100,000 major firms in the world that include information on supply-chain ties among them, we find evidence of intra-national propagation as found in the literature but no international propagation. We further investigate possible mechanisms, finding that internationalized firms' ability to substitute for damaged partners most likely explains the absence of international propagation.