Tracing cascading economic impacts of volcanic disruption through regional value chains: Implications for disaster risk reduction

Volcanic eruptions pose significant risks to regional economies by disrupting local industries and their interdependent supply chains. This study examines the cascading economic consequences of a volcanic disruption scenario in the Kawerau District of New Zealand’s Bay of Plenty, a nationally significant hub for paper manufacturing. Extending the stepwise MRIO tracing framework of Patterson et al. (2011), this study integrates both upstream input dependencies and downstream market linkages to trace cascading disruption pathways across regional value chains. The analysis reveals the region’s strong reliance on forestry inputs and international export markets. A simulated 50% reduction in forestry supply corresponds to an estimated output shortfall of NZD 2020Q1 $37.5million (6.4%) in the Kawerau Paper manufacturing sector, with impacts propagating through national and global value chains. Scenario analysis shows that targeted resilience measures, such as inventory stockpiling, can substantially mitigate these cascading losses. A 10% forestry input buffer avoids approximately NZD 2020Q1 $21.9million in upstream cascading losses, while a 20% buffer avoids NZD 2020Q1 $43.9million relative to the no-inventory case. By linking volcanic hazard context with network-based economic modelling, this study provides an operational framework for assessing systemic risk and identifying leverage points for resilience investment, offering practical insights for strengthening preparedness in hazard-prone regional economies.