publication . Article . 2016

Input Specificity and the Propagation of Idiosyncratic Shocks in Production Networks *

Jean-Noel Barrot; Julien Sauvagnat;
Open Access
  • Published: 01 May 2016 Journal: The Quarterly Journal of Economics, volume 131, pages 1,543-1,592 (issn: 0033-5533, eissn: 1531-4650, Copyright policy)
  • Publisher: Oxford University Press (OUP)
  • Country: United States
Abstract
Abstract This article examines whether firm-level idiosyncratic shocks propagate in production networks. We identify idiosyncratic shocks with the occurrence of natural disasters. We find that affected suppliers impose substantial output losses on their customers, especially when they produce specific inputs. These output losses translate into significant market value losses, and they spill over to other suppliers. Our point estimates are economically large, suggesting that input specificity is an important determinant of the propagation of idiosyncratic shocks in the economy.
Subjects
free text keywords: Economics and Econometrics, Microeconomics, Natural disaster, Market value, Economics, Point estimation, Econometrics
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