Firms, Failures, and Fluctuations: The Macroeconomics of Supply Chain Disruptions

Daron Acemoglu and Alireza Tahbaz-Salehi

No 15074, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper studies how firm failures and the resulting disruptions to supply chains can amplify negative shocks. We develop a non-competitive model where customized supplier-customer relations increase productivity, and the relationship-specific surplus generated between firms and their suppliers is divided via bargaining. Changes in productivity alter the distribution of surplus throughout the economy and determine which firms are at the margin of failure. A firm’s failure may spread to its suppliers and customers and to firms in other parts of the production network. We provide existence, uniqueness, and a series of comparative statics results, and show how the response of the equilibrium production network may propagate recessionary shocks.

Keywords: Amplification; Bargaining; Business cycles; Economic fluctuations; Production networks; Relationship-specific surplus; Supply chains (search for similar items in EconPapers)
JEL-codes: D57 E23 E32 (search for similar items in EconPapers)
Date: 2020-07
New Economics Papers: this item is included in nep-bec, nep-mac and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (34)

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Working Paper: Firms, Failures, and Fluctuations: The Macroeconomics of Supply Chain Disruptions (2020)
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