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Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience

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  • Giulio Cainelli

    ()

  • Sandro Montresor

    ()

  • Giuseppe Vittucci Marzetti

    ()

Abstract

The paper analyzes how (production and financial) inter-firm networks can affect firms’ default probabilities and observed default rates. A simple theoretical model of shock transfer is built to investigate some stylized facts on how firm-idiosyncratic shocks are allocated in the network, and how this allocation changes firm default probabilities. The model shows that the network works as a perfect “risk-pooling” mechanism, when it is both strongly connected and symmetric. But the “risk-sharing” does not necessarily reduce default rates, unless the shock firms face is lower on average than their financial capacity. Conceived as cases of symmetric inter-firm networks, industrial districts might have a comparative disadvantage in front of heavy crises. Copyright Springer-Verlag 2012

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Bibliographic Info

Article provided by Springer in its journal Journal of Evolutionary Economics.

Volume (Year): 22 (2012)
Issue (Month): 4 (September)
Pages: 711-734

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Handle: RePEc:spr:joevec:v:22:y:2012:i:4:p:711-734

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Related research

Keywords: Firm clusters; Industrial districts; Interlinking transactions; Resilience; Systemic risk; R11; R12; G20;

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References

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    • Francis Bloch (GREQAM and Universite de la Mediterranee), Garance Genicot (Georgetown University, and Debraj Ray (New York University and Instituto de Analisis Economico (CSIC)), 2004. "Informal Insurance in Social Networks," Working Papers gueconwpa~04-04-16, Georgetown University, Department of Economics.
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Citations

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Cited by:
  1. Reinhart, Carmen M. & Rogoff, Kenneth S., 2008. "Is the 2007 US Sub-Prime Financial Crisis So Different? An International Historical Comparison," Scholarly Articles 11129156, Harvard University Department of Economics.
  2. Giulio Cainelli & Sandro Montresor & Giuseppi Vittucci Marzetti, 2013. "Spatial agglomeration and firm exit: a spatial dynamic analysis for Italian provinces," "Marco Fanno" Working Papers 0173, Dipartimento di Scienze Economiche "Marco Fanno".
  3. Reinhart, Carmen M. & Rogoff, Kenneth S., 2009. "The Aftermath of Financial Crises," Scholarly Articles 11129155, Harvard University Department of Economics.
  4. Roberto Antonietti & Giulio Cainelli & Monica Ferrari & Stefania Tomasini, 2014. "Banks, industrial relatedness and firms’ investments," Papers in Evolutionary Economic Geography (PEEG) 1402, Utrecht University, Section of Economic Geography, revised Jan 2014.

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