Revealing production networks from firm growth dynamics

Luca Mungo and Jos\'e Moran

Papers from arXiv.org

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 investigate if this observation can be used to reconstruct the topology of a supply chain network using Gaussian Markov Models.

Date: 2023-02, Revised 2023-07
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