Revealing production networks from firm growth dynamics

Luca Mungo and José Moran

INET Oxford Working Papers from Institute for New Economic Thinking at the Oxford Martin School, University of Oxford

Abstract: We study the correlation structure of firm growth rates. We show that most firms are correlated because of their exposure to a common factor but that firms linked through the supply chain exhibit a stronger correlation on average than firms that are not. Removing this common factor significantly reduces the average correlation between two firms with no relationship in the supply chain while maintaining a significant correlation between two firms that are linked. We then demonstrate how this observation can be used to reconstruct the topology of a supply chain network using Gaussian Markov Models.

Pages: 21 pages
Date: 2023-02
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Persistent link: https://EconPapers.repec.org/RePEc:amz:wpaper:2023-02

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