Quantifying Waterway Supply Chain Shocks: Regional Propagation in the Rhine Area

Transportation restrictions on waterways due to high or low water level events lead to disruptions of supply chains, which are exogenous to the current state of the economy. This paper proposes a novel method to exploit and quantify these surprising transportation restrictions which lead to regional supply chain disruptions and applies the method to the river Rhine. A surprising decrease of the Rhine’s shipping capacity leads to a short-lived but significant decrease in economic activity, not only in the bordering federal states but entire Germany. This effect is more pronounced in industries and regions that rely more heavily on the Rhine and the goods shipped on it. Also, we document a substitution towards suppliers that do not rely on the Rhine to deliver their goods.