Adam Smith Business School

Dr Mathieu Taschereau-Dumouchel, Cornell University

'Endogenous Production Networks under Uncertainty' (co-authored by A. Kopytov, B. Mishra & K. Nimark)
Thursday 3 March, 3pm - 4.30pm
Zoom online seminar

Register at business-events@glagow.ac.uk

Abstract

Supply chain disturbances can lead to substantial increases in production costs. To mitigate these risks, firms tend to reduce their reliance on volatile suppliers. We construct a model of endogenous network formation to investigate how these decisions affect the structure of the production network and, through that channel, the level and volatility of macroeconomic aggregates. When uncertainty increases in the model producers prefer to purchase from more stable suppliers, even though they might sell at higher prices. The resulting reorganisation of the network leads to less macroeconomic volatility, but at the cost of a decline in aggregate output. The model also predicts that more productive and stable firms have higher Domar weights—a measure of their importance as suppliers—in the equilibrium network. We calibrate the model to U.S. data and find that the mechanism can account for a sizable decline in expected GDP during periods of high uncertainty like the Great Recession.

Biography

Mathieu Taschereau-Dumouchel is an Assistant Professor of Economics and Robert Jain Faculty Fellow at the Cornell University. He is also a Faculty Affiliate at the Cornell Center for Social Sciences and at the Center for the Study of Inequality. His main research topics are Macroeconomics, Labour Economics and Networks.

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Further information: business-events@glasgow.ac.uk 

First published: 21 February 2022