Natural disasters and trade: the mitigating impact of port substitution

Integrating human behaviour dynamics into flood disaster risk assessment

Masashige Hamano and Wessel Vermeulen

Journal of Economic Geography, 2020, vol. 20, issue 3, 809-856

Abstract: We study the effect of natural disasters on port-level exports. We model the interaction between firms and ports to study how strongly exports from one port are affected by changes in the cost of exporting at neighboring ports. We extend the standard trade model with heterogeneous firms to a multiple port structure where exporting is subject to port specific local transportation costs, port specific fixed export costs and international bilateral trade costs. We show that gravity distortion due to firm heterogeneity is conditional on the comparative advantage at the port level and resulting substitution of exports across ports. We present evidence of the substitution effect using the 2011 Great East Japan Earthquake, indicating that at least 40% of exports was substituted to other ports following the disaster. The substitution effect is the strongest in technology intensive product categories, which suggests an interaction between supply chains and domestic trade costs.

Keywords: Firm heterogeneity; extensive margins; transportation costs; fixed costs; natural disasters (search for similar items in EconPapers)
JEL-codes: F14 O18 R1 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (8)

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