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The Impact of Node Addition and Deletion on Network Production Fluctuations

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  • Mahdi Kohan Sefidi

Abstract

Production networks, dynamic systems of firms linked through input-output relationships, transmit microeconomic shocks into macroeconomic fluctuations. While prior studies often assume static networks, real-world economies feature continuous firm entry (node addition) and exit (node deletion). We develop a probabilistic model to analyze how these dynamics affect production volatility and network resilience. Integrating Leontief input-output frameworks with controllability theory. By quantifying fluctuations as expected values under probabilistic node dynamics, we identify trade-offs between adaptability and stability. Methodologically, we unify Kalman rank criteria and minimum input theory, offering policymakers insights to balance innovation-driven entry with safeguards against destabilizing exits.

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  • Mahdi Kohan Sefidi, 2025. "The Impact of Node Addition and Deletion on Network Production Fluctuations," Papers 2505.10154, arXiv.org.
    • Handle: RePEc:arx:papers:2505.10154
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    References listed on IDEAS

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    1. Benjamin Golub & Matthew Elliott, 2022. "Networks and Economic Fragility," Annual Review of Economics, Annual Reviews, vol. 14(1), pages 665-696, August.
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