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Linkages of Firm Spending Behavior through Supply Chains

Author

Listed:
  • Ko Adachi

    (Bank of Japan)

  • Kosuke Aoki

    (Graduate School of Economics, University of Tokyo)

  • Yoshiyuki Kurachi

    (Bank of Japan)

  • Taiki Ono

    (Bank of Japan)

  • Akitoshi Toyoda

    (Bank of Japan)

Abstract

This paper empirically analyzes the linkages of firm spending behavior along supply chains, with a focus on capital investment and wage-setting, using production network data from Japan's manufacturing sector. The analysis yields the following findings. First, there is evidence of bonus linkages within supply chains, originating from temporary foreign demand shocks. Second, more broadly, the capital investment of firms can be influenced by downstream investment activity in supply chains, whether domestically or internationally. In addition, the determination of regular wages within a firm appears to be influenced by the wage rates set by focal firms within the same supply chains. These results underscore the importance of analyzing firm behavior while taking into account the multilayered supply chain structure centered around large manufacturing firms in order to understand Japan's economic dynamics.

Suggested Citation

  • Ko Adachi & Kosuke Aoki & Yoshiyuki Kurachi & Taiki Ono & Akitoshi Toyoda, 2026. "Linkages of Firm Spending Behavior through Supply Chains," Bank of Japan Working Paper Series 26-E-14, Bank of Japan.
    • Handle: RePEc:boj:bojwps:wp26e14
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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