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The Macroeconomics of Supply Chain Disruptions

Daron Acemoglu and Alireza Tahbaz-Salehi

The Review of Economic Studies, 2025, vol. 92, issue 2, 656-695

Abstract: This paper develops a model to study the macroeconomic implications of supply chain disruptions with three key ingredients: (i) a firm-level network of customized supplier–customer links that generate relationship-specific productivity gains; (ii) bargaining over these relationship-specific surpluses; and (iii) an extensive margin of adjustment, whereby firms decide to form or sever relations with suppliers and customers. We establish equilibrium existence and uniqueness, provide characterization results, and present a number of comparative statics that show how supply chains and aggregate output respond to shocks. We also show that equilibrium supply chains are inefficient and exhibit an inherent fragility: small shocks can lead to discontinuous changes in output, even though the efficient allocation is always continuous in the same shocks. We explore several macroeconomic implications of this fragility.

Keywords: Production networks; Supply chains; Bargaining; Relationship-specific investments (search for similar items in EconPapers)
Date: 2025
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The Review of Economic Studies is currently edited by Thomas Chaney, Xavier d’Haultfoeuille, Andrea Galeotti, Bård Harstad, Nir Jaimovich, Katrine Loken, Elias Papaioannou, Vincent Sterk and Noam Yuchtman

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