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Revealing production networks from firm growth dynamics

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  • Mungo, Luca
  • Moran, José

Abstract

We study the correlation structure of firm growth rates. We show that most firms are correlated because of their exposure to a common factor but that firms linked through the supply chain exhibit a stronger correlation on average than firms that are not. Removing this common factor significantly reduces the average correlation between two firms with no relationship in the supply chain while maintaining a significant correlation between two firms that are linked. We then demonstrate how this observation can be used to reconstruct the topology of a supply chain network using Gaussian Markov Models.

Suggested Citation

  • Mungo, Luca & Moran, José, 2023. "Revealing production networks from firm growth dynamics," INET Oxford Working Papers 2023-02, Institute for New Economic Thinking at the Oxford Martin School, University of Oxford.
    • Handle: RePEc:amz:wpaper:2023-02
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    File URL: https://www.inet.ox.ac.uk/files/reconstruction-v2.pdf
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    Cited by:

    1. Jos'e Moran & Massimo Riccaboni, 2024. "Compositional Growth Models," Papers 2404.07935, arXiv.org.

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