IDEAS home Printed from https://ideas.repec.org/a/ucp/jpolec/doi10.1086-725173.html
   My bibliography  Save this article

Supply Chain Resilience: Should Policy Promote International Diversification or Reshoring?

Author

Listed:
  • Gene M. Grossman
  • Elhanan Helpman
  • Hugo Lhuillier

Abstract

Little is known about optimal policy in the face of global supply chain disruptions. Should governments promote resilience by subsidizing backup sources of input supply in multiple countries? Should they encourage firms to source from safer domestic suppliers? We address these questions in a model of production with a critical input and exogenous risks of supply disturbances. With constant elasticity of substitution preferences, a subsidy for diversification achieves the constrained social optimum. When the demand elasticity rises with price, private investments in resilience may be socially excessive and the social planner may wish to discourage diversification while favoring sourcing from abroad.

Suggested Citation

  • Gene M. Grossman & Elhanan Helpman & Hugo Lhuillier, 2023. "Supply Chain Resilience: Should Policy Promote International Diversification or Reshoring?," Journal of Political Economy, University of Chicago Press, vol. 131(12), pages 3462-3496.
    • Handle: RePEc:ucp:jpolec:doi:10.1086/725173
    DOI: 10.1086/725173
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1086/725173
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: http://dx.doi.org/10.1086/725173
    Download Restriction: Access to the online full text or PDF requires a subscription.
    File URL: https://libkey.io/10.1086/725173?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Felbermayr Gabriel & Janeba Eckhard, 2024. "Improving Supply Security: Guidelines and Policy Proposals," Intereconomics: Review of European Economic Policy, Sciendo, vol. 59(3), pages 146-153.
    2. Hadachek, Jeffrey & Ma, Meilin, 2024. "Risk Externalities in Vertical Supply Chains," 2024 Annual Meeting, July 28-30, New Orleans, LA 343748, Agricultural and Applied Economics Association.
    3. Ignacia Cuevas & Thomas Bourany & Gustavo González, 2024. "Supply Chain Uncertainty and Diversification," Working Papers Central Bank of Chile 1018, Central Bank of Chile.
    4. Nikookar, Ethan & Gligor, David & Russo, Ivan, 2024. "Supply chain resilience: When the recipe is more important than the ingredients for managing supply chain disruptions," International Journal of Production Economics, Elsevier, vol. 272(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ucp:jpolec:doi:10.1086/725173. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Journals Division (email available below). General contact details of provider: https://www.journals.uchicago.edu/JPE .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.