The Adoption and Termination of Suppliers over the Business Cycle

Le Xu, Yang Yu and Francesco Zanetti

No 18976, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We assemble a novel firm-level dataset to study the adoption and termination of suppliers over business cycles. We document that the aggregate number and rate of adoption of suppliers are procyclical. The rate of termination is acyclical at the aggregate level, and the cyclicality of termination encompasses large differences across producers. To account for these new facts, we develop a model with optimizing producers that incur separate costs for management, adoption, and termination of suppliers. These costs alter the incentives to scale up production and to replace existing with new suppliers. Both forces are critical to replicating the observed cyclicality in the adoption and termination rates at the producer and aggregate levels. Sufficiently high convexity in management relative to adjustment costs is required to replicate the observed decrease in the procyclicality of termination of suppliers with the size of producers. The optimal policy entails subsidies to management and adjustment costs.

JEL-codes: E32 L14 L24 (search for similar items in EconPapers)
Date: 2024-04
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP18976 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: The Adoption and Termination of Suppliers over the Business Cycle (2024)
Working Paper: The Adoption and Termination of Suppliers over the Business Cycle (2024)
Working Paper: The Adoption and Termination of Suppliers over the Business Cycle (2024)
Working Paper: The Adoption and Termination of Suppliers over the Business Cycle (2024)
Working Paper: The Adoption and Termination of Suppliers over the Business Cycle (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:18976

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP18976
orders@cepr.org

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by (repec@cepr.org).