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Author : Piyush Panigrahi
Release : 2021
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Book Synopsis Endogenous Spatial Production Networks by : Piyush Panigrahi
Download or read book Endogenous Spatial Production Networks written by Piyush Panigrahi. This book was released on 2021. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Piyush Paritosh Panigrahi
Release : 2021
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Book Synopsis Endogenous Spatial Production Networks: Theory, Estimation, and Evidence from Indian Firm-to-Firm Linkages by : Piyush Paritosh Panigrahi
Download or read book Endogenous Spatial Production Networks: Theory, Estimation, and Evidence from Indian Firm-to-Firm Linkages written by Piyush Paritosh Panigrahi. This book was released on 2021. Available in PDF, EPUB and Kindle. Book excerpt: In modern economies, production is organized in large-scale complex networks of firms trading intermediate inputs with each other. Larger Indian firms selling inputs to other firms tend to have more customers, tend to be used more intensively by their customers, and tend to have larger customers. Motivated by these regularities, I propose a novel empirical model of trade featuring endogenous formation of input-output linkages between spatially distant firms. The empirical model consists of (a) a theoretical framework that accommodates first order features of firm-to-firm network data, (b) a maximum likelihood framework for structural estimation that is uninhibited by the scale of data, and (c) a procedure for counterfactual analysis that speaks to the effects of micro- and macro- shocks to the spatial network economy. In the model, differences in production costs across firms arise not just from differences in productivity but also from finding the most cost-effective suppliers of intermediate inputs. Firms with low production costs end up larger because they find more customers, are used more intensively by their customers and in turn their customers lower production costs and end up larger themselves. The model is estimated using novel micro-data on firm-to-firm sales between Indian firms. The model's fit is good. The estimated model implies that a 10% decline in inter-state border frictions in India leads to welfare gains ranging between 1% and 8% across districts. Moreover, over half of the variation in changes in firms' sales to other firms can be explained by endogenous changes in the network structure.
Author : Costas Arkolakis
Release : 2023
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Book Synopsis Spatial Production Networks by : Costas Arkolakis
Download or read book Spatial Production Networks written by Costas Arkolakis. This book was released on 2023. Available in PDF, EPUB and Kindle. Book excerpt: We use new theory and data to study how firms endogenously form production networks across regions and countries. Supplier and buyer relationships form depending on firms' productivity and geographic location. We characterize the normative and positive properties of the spatial distribution of economic activity and welfare in general equilibrium. We calibrate the model using domestic and international firm-to-firm trade data from Chile. Both iceberg trade costs and search and matching frictions are important for aggregate trade flows and production networks. Endogenous formation of production networks leads to larger and more dispersed effects of international and intra-national trade cost shocks.
Author : Daron Acemoglu
Release : 2017
Genre : Business networks
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Book Synopsis Endogenous Production Networks by : Daron Acemoglu
Download or read book Endogenous Production Networks written by Daron Acemoglu. This book was released on 2017. Available in PDF, EPUB and Kindle. Book excerpt: We develop a tractable model of endogenous production networks. Each one of a number of products can be produced by combining labor and an endogenous subset of the other products as inputs. Different combinations of inputs generate (prespecified) levels of productivity. Markets are "contestable" in the sense that production technologies are available to a large number of potential producers. We establish the existence and uniqueness of an equilibrium with an endogenous production network and provide comparative static results on how prices and endogenous technology choices (and thus the production network) respond to changes in parameters. These results show that improvements in technology (or reductions in distortions) spread throughout the economy via input-output linkages and reduce all prices, and under reasonable restrictions on the menu of production technologies, also lead to a denser production network. Using a dynamic version of the model, we show that the endogenous evolution of the production network could be a powerful force towards sustained economic growth. At the root of this result is the fact that the arrival of a few new products expands the set of technological possibilities of all existing industries by a large amount -- that is, if there are n products, the arrival of one more new product increases the combinations of inputs that each existing product can use from 2n-1 to 2n , thus enabling significantly more pronounced cost reductions from the choice of optimal technology combinations. These cost reductions then spread to other industries that benefit from lower input prices and are further incentivized to adopt additional inputs. Keywords: economic growth, economic networks, input-output linkages, network formation organization of production, production network, productivity. JEL Classification: C67, O41, L23, E10, E23.
Author : Emmanuel Dhyne
Release : 2023
Genre :
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Book Synopsis Endogenous Production Networks with Fixed Costs by : Emmanuel Dhyne
Download or read book Endogenous Production Networks with Fixed Costs written by Emmanuel Dhyne. This book was released on 2023. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a tractable model of endogenous production networks with fixed costs associated with the formation of links between firms. The model consists of a finite number of firm types producing differentiated products. Each firm is characterized by firm-specific parameters describing its CES production function, firm-specific domestic and foreign demand shifters, and a firm-specific set of potential suppliers and buyers. We consider versions of the model in which either the buyer or the supplier initiates the formation of links, and versions in which the production network can be cyclic or acyclic. Our main theoretical result is that the closed economy equilibrium is unique if the set of feasible networks consists only of networks that are acyclic and the buyer initiates the link formation while having full bargaining power in price negotiations with the supplier. We provide examples of multiple equilibria if the supplier initiates the link formation in both cyclic and acyclic feasible networks or if the buyer initiates the link formation in a cyclic production network. We take the acyclic production network model to Belgian data on firm-to-firm production networks and show that it approximates well the salient features of the network. The endogenous network model generates substantial churn in domestic firm-to-firm linkages in response to trade shocks. However, the endogenous network model generates only moderately different welfare changes compared to a model with fixed linkages, suggesting that exogenous production networks can approximate the welfare response to trade shocks reasonably well.
