Climate Risks and Global Value Chains : The Impact of the 2011 Thailand Flood on Swedish Firms

We study how the catastrophic 2011 Thailand flood affected Swedish firms that imported from Thailand. Output by exposed firms dropped by 8\% in 2012. In aggregate, this translates into a 1.08 billion SEK drop in Thai imports for these firms, which translated into over 29.7 billion SEK in lost sales. The magnitude of the amplification effect is striking. The effects of the flood did not go away in spite of the relatively rapid recovery in Thai production, which is consistent with substantial fixed costs in establishing links in supply networks. Another key result is the importance of geographical diversification in a value chain. Finally, we find weak evidence of re-shoring