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Inter-firm Network Dynamics of Production during the COVID-19 Pandemic

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  • Yukiko SAITO
  • Xinyi TONG
  • Kongphop WONGKAEW

Abstract

This paper examines the dynamics of the Japanese production network during the COVID-19 pandemic. We utilize a panel dataset of approximately 1.8 million firms spanning from 2015 to 2023 and document that firms largely maintained existing inter-firm relationships during the early stages of the pandemic, often before severing ties in subsequent periods. Moreover, new link formation did not recover at a commensurate pace, resulting a net contraction of the production network. Furthermore, we identify a shift in the geographical distance between transacted firms. Firms increasingly dropped local partners but added distant partners. Notably, changes in network dynamics and geographical distance were driven by firms with high ICT intensity and those located in core prefectures.

Suggested Citation

  • Yukiko SAITO & Xinyi TONG & Kongphop WONGKAEW, 2026. "Inter-firm Network Dynamics of Production during the COVID-19 Pandemic," Discussion papers 26027, Research Institute of Economy, Trade and Industry (RIETI).
    • Handle: RePEc:eti:dpaper:26027
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    References listed on IDEAS

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    1. Vasco M Carvalho & Makoto Nirei & Yukiko U Saito & Alireza Tahbaz-Salehi, 2021. "Supply Chain Disruptions: Evidence from the Great East Japan Earthquake," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 136(2), pages 1255-1321.
    2. David Baqaee & Emmanuel Farhi, 2020. "Nonlinear Production Networks with an Application to the Covid-19 Crisis," NBER Working Papers 27281, National Bureau of Economic Research, Inc.
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