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

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  • Daron Acemoglu
  • Alireza Tahbaz-Salehi

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.

Suggested Citation

  • Daron Acemoglu & Alireza Tahbaz-Salehi, 2020. "Firms, Failures, and Fluctuations: The Macroeconomics of Supply Chain Disruptions," NBER Working Papers 27565, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27565
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    References listed on IDEAS

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    1. Vasco M Carvalho & Makoto Nirei & Yukiko U Saito & Alireza Tahbaz-Salehi, 0. "Supply Chain Disruptions: Evidence from the Great East Japan Earthquake," The Quarterly Journal of Economics, Oxford University Press, vol. 136(2), pages 1255-1321.
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    5. Yukiko Saito & Makoto Nirei & Vasco Carvalho, 2014. "Supply Chain Disruptions: Evidence from Great East Japan Earthquake," 2014 Meeting Papers 595, Society for Economic Dynamics.
    6. Lucia Foster & Cheryl Grim & John Haltiwanger, 2016. "Reallocation in the Great Recession: Cleansing or Not?," Journal of Labor Economics, University of Chicago Press, vol. 34(S1), pages 293-331.
    7. Ezra Oberfield, 2018. "A Theory of Input–Output Architecture," Econometrica, Econometric Society, vol. 86(2), pages 559-589, March.
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    More about this item

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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