A methodological approach to quantifying socioeconomic impacts linked to supply shocks

Abstract

Input-output models are commonly used to assess socioeconomic impacts. These models typically evaluate exogenous variations in demand-related elements; however, they do not fully capture the associated effects of backward and forward sectoral linkages simultaneously. An analysis from the supply perspective is of greater interest to economic sectors that exploit natural resources because their activity is subject to natural variations or political factors beyond the producers' direct control. This paper proposes a methodology to improve the estimation of the impacts of these variations or supply shocks. Within the methodological context of input-output analysis, a practical procedure is introduced including price mechanisms that allow us to consider all sectoral linkages (backward and forward). Therefore, the proposed method will improve impact assessments derived from supply shocks linked to environmental events.