Publications

An input-output procedure for calculating economy-wide economic impacts in supply chains using homeland security consequence analysis tools

Warren, Drake E.; Vargas, Vanessa N.; Smith, Braeton J.; Vugrin, Eric D.

Sandia National Laboratories has developed several models to analyze potential consequences of homeland security incidents. Two of these models (the National Infrastructure Simulation and Analysis Center Agent-Based Laboratory for Economics, N-ABLE{trademark}, and Loki) simulate detailed facility- and product-level consequences of simulated disruptions to supply chains. Disruptions in supply chains are likely to reduce production of some commodities, which may reduce economic activity across many other types of supply chains throughout the national economy. The detailed nature of Sandia's models means that simulations are limited to specific supply chains in which detailed facility-level data has been collected, but policymakers are often concerned with the national-level economic impacts of supply-chain disruptions. A preliminary input-output methodology has been developed to estimate national-level economic impacts based upon the results of supply-chain-level simulations. This methodology overcomes two primary challenges. First, the methodology must be relatively simple to integrate successfully with existing models; it must be easily understood, easily applied to the supply-chain models without user intervention, and run quickly. The second challenge is more fundamental: the methodology must account for both upstream and downstream impacts that result from supply-chain disruptions. Input-output modeling typically estimates only upstream impacts, but shortages resulting from disruptions in many supply chains (for example, energy, communications, and chemicals) are likely to have large downstream impacts. In overcoming these challenges, the input-output methodology makes strong assumptions about technology and substitution. This paper concludes by applying the methodology to chemical supply chains.