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Sparse production networks

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  • Bernard, Andrew B.
  • Zi, Yuan

Abstract

Firm-to-firm connections in domestic and international production networks play a fundamental role in economic outcomes. Firm heterogeneity and the sparse nature of firm-to-firm connections implicitly discipline network structure. We find that a large group of well-established statistical relationships are not useful in improving our understanding of production networks. We propose an "elementary" model for production networks based on random matching and firm heterogeneity and characterize the families of statistics and data generating processes that may raise underidentification concerns in more complex models. The elementary model is a useful benchmark in developing "instructive" statistics and informing model construction and selection.

Suggested Citation

  • Bernard, Andrew B. & Zi, Yuan, 2022. "Sparse production networks," LSE Research Online Documents on Economics 118004, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:118004
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    File URL: http://eprints.lse.ac.uk/118004/
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    References listed on IDEAS

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    Cited by:

    1. Costas Arkolakis & Federico Huneeus & Yuhei Miyauchi, 2023. "Spatial Production Networks," Working Papers Central Bank of Chile 971, Central Bank of Chile.

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    More about this item

    Keywords

    firm-to-firm networks; model selection; balls-and-bins; buyer-seller matching; underidentification;
    All these keywords.

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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