Do Economic Effects of the Anti-COVID-19 Lockdowns in Different Regions Interact Through Supply Chains?

36 Pages Posted: 19 Sep 2020 Last revised: 25 Mar 2021

See all articles by Hiroyasu Inoue

Hiroyasu Inoue

University of Hyogo, Graduate School of Information Science

Yohsuke Murase

RIKEN Advanced Institute for Computational Science

Yasuyuki Todo

Waseda University

Date Written: September 15, 2020

Abstract

To prevent the spread of COVID-19, many cities, states, and countries have `locked down', restricting economic activities in non-essential sectors. Such lockdowns have substantially shrunk production in most countries. This study examines how the economic effects of lockdowns in different regions interact through supply chains, which are a network of firms for production, by simulating an agent-based model of production using supply-chain data for 1.6 million firms in Japan. We further investigate how the complex network structure affects the interactions between lockdown regions, emphasising the role of upstreamness and loops by decomposing supply-chain flows into potential and circular flow components. We find that a region's upstreamness, intensity of loops, and supplier substitutability in supply chains with other regions largely determine the economic effect of the lockdown in the region. In particular, when a region lifts its lockdown, its economic recovery substantially varies depending on whether it lifts the lockdown alone or together with another region closely linked through supply chains. These results indicate that the economic effect produced by exogenous shocks in a region can affect other regions and therefore this study proposes the need for inter-region policy coordination to reduce economic loss due to lockdowns.

Keywords: COVID-19, lockdown, supply chains, simulation, propagation, interactions, network intervention

JEL Classification: L00, L14

Suggested Citation

Inoue, Hiroyasu and Murase, Yohsuke and Todo, Yasuyuki, Do Economic Effects of the Anti-COVID-19 Lockdowns in Different Regions Interact Through Supply Chains? (September 15, 2020). Available at SSRN: https://ssrn.com/abstract=3692937 or http://dx.doi.org/10.2139/ssrn.3692937

Hiroyasu Inoue (Contact Author)

University of Hyogo, Graduate School of Information Science ( email )

7-1-28 Minato-jima, Minami-machi
Chuo-ku
Kobe, Hyogo 650-0047
Japan

Yohsuke Murase

RIKEN Advanced Institute for Computational Science ( email )

7-1-26 Minatojima-Minamimachi
Chuo-ku, 650-0047
Japan

Yasuyuki Todo

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
tokyo, 169-8050
Japan

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