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Input Linkages and the Transmission of Shocks: Firm-Level Evidence from the 2011 Tōhoku Earthquake

Christoph Boehm1; Aaron Flaaen2; Nitya Pandalai-Nayar1

1 University of Texas, Austin · 2 Federal Reserve Board of Governors

The Review of Economics and Statistics 2019

Using novel firm-level microdata and leveraging a natural experiment, this paper provides causal evidence for the role of trade and multinational firms in the cross-country transmission of shocks. The scope for trade linkages to generate cross-country spillovers depends on the elasticity of substitution with respect to domestic inputs. Using the 2011 Tōhoku earthquake as an exogenous shock, we structurally estimate production elasticities at the firm level and find greater complementarities in input usage than previously thought. For Japanese affiliates in the United States, output falls roughly one-for-one with declines in imports, consistent with a relationship between imported and domestic inputs that is close to Leontief.

DOI
10.1162/rest_a_00750
Volume
101 (1)
Pages
60-75
Language
en
Export
BibTeX
Sources
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