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Aggregate fluctuations in adaptive production networks

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  • Michael D. König

    (a Centre for Economic Policy Research, London, EC1V 0DX, United Kingdom;; b KOF Swiss Economic Institute, ETH Zurich, 8092 Zurich, Switzerland;; c Tinbergen Institute and Department of Spatial Economics, Vrije Universiteit (VU) Amsterdam, 1081 HV Amsterdam, the Netherlands;)

  • Andrei Levchenko

    (a Centre for Economic Policy Research, London, EC1V 0DX, United Kingdom;; d Department of Economics, University of Michigan, Ann Arbor, MI 48109;; e National Bureau of Economic Research, Cambridge, MA 02138-5398;)

  • Tim Rogers

    (f Centre for Networks and Collective Behaviour, Department of Mathematical Sciences, University of Bath, BA2 7AY Bath, United Kingdom;)

  • Fabrizio Zilibotti

    (a Centre for Economic Policy Research, London, EC1V 0DX, United Kingdom;; e National Bureau of Economic Research, Cambridge, MA 02138-5398;; g Department of Economics, Yale University, New Haven, CT 06520-8268)

Abstract

Economic production is organized in supply chain networks. The resilience of supply chains is, therefore, crucial for robust economic growth. Governments have discussed policies to improve the resilience of supply chains, including the notion of reshoring parts of the supply chains to reduce dependence on foreign suppliers. A calibrated version of our theory predicts that restricting buyer–supplier links via such policies reduces output and increases economic fluctuations and that economic instability can be amplified through network adaptivity.

Suggested Citation

  • Michael D. König & Andrei Levchenko & Tim Rogers & Fabrizio Zilibotti, 2022. "Aggregate fluctuations in adaptive production networks," Proceedings of the National Academy of Sciences, Proceedings of the National Academy of Sciences, vol. 119(38), pages 2203730119-, September.
    • Handle: RePEc:nas:journl:v:119:y:2022:p:e2203730119
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    Cited by:

    1. Julian di Giovanni & Andrei A. Levchenko & Isabelle Mejean, 2024. "Foreign Shocks as Granular Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 132(2), pages 391-433.

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