Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience

Giulio Cainelli (), Sandro Montresor () and Giuseppe Vittucci Marzetti
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Giulio Cainelli: CERIS-CNR

A chapter in Long Term Economic Development, 2013, pp 113-136 from Springer

Abstract: Abstract The paper analyzes how (production and financial) inter-firm networks can affect firms’ default probabilities and observed default rates. A simple theoretical model of shock transfer is built to investigate some stylized facts on how firm-idiosyncratic shocks are allocated in the network, and how this allocation changes firm default probabilities. The model shows that the network works as a perfect “risk-pooling” mechanism, when it is both strongly connected and symmetric. But the “risk-sharing” does not necessarily reduce default rates, unless the shock firms face is lower on average than their financial capacity. Conceived as cases of symmetric inter-firm networks, industrial districts might have a comparative disadvantage in front of heavy crises.

Keywords: Trade Credit; Default Probability; Industrial District; Default Rate; Equilibrium Allocation (search for similar items in EconPapers)
Date: 2013
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Related works:
Journal Article: Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience (2012)
Working Paper: Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience (2010)
Working Paper: Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:eccchp:978-3-642-35125-9_6

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DOI: 10.1007/978-3-642-35125-9_6

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