Beyond Domar Weights: A New Measure of Systemic Importance in Production Networks

Idiosyncratic supply shocks often coincide with changes in producers’ demand for intermediate inputs. We present a new measure of systemic importance in economies with input-output linkages. Scale centrality measures the aggregate im-pact of simultaneous supply and demand shocks to a producer, which propagate through (in)direct customers and suppliers. Theoretically, scale centrality encompasses and extends an existing centrality measure: Domar weights. Empirically, we ï¬ nd: i) Domar weights underestimate sectors’ systemic importance, ii) sectors with high scale centralities are typically downstream in the supply chain, and iii) industries’ scale centrality can change substantially over time despite the stability of their Domar weights.