Supply Chain Disruptions, the Structure of Production Networks, and the Impact of Globalization

48 Pages Posted: 27 Oct 2023 Last revised: 28 Aug 2024

See all articles by Matthew Elliott

Matthew Elliott

University of Cambridge

Matthew O. Jackson

Stanford University - Department of Economics; Santa Fe Institute

Date Written: September 23, 2023

Abstract

We introduce a parsimonious multi-sector model of international production and use it to study how a disruption in the production of intermediate goods propagates through to final goods, and how that impact depends on the goods' positions in, and overall structure of, the production network. We show that the short-run disruption can be dramatically larger than the long-run disruption. The short-run disruption depends on the value of all of the final goods whose supply chains involve a disrupted good, while by contrast the long-run disruption depends only on the cost of the disrupted goods. We use the model to show how increased complexity of supply chains leads to increased fragility in terms of the probability and expected short-run size of a disruption. We also show how decreased transportation costs can lead to increased specialization in production, with lower chances for disruption but larger impacts conditional upon disruption.

Keywords: Supply Chains, Globalization, Fragility, Production Networks, International Trade

JEL Classification: D85, E23, E32, F44, F60, L14

Suggested Citation

Elliott, Matthew and Jackson, Matthew O., Supply Chain Disruptions, the Structure of Production Networks, and the Impact of Globalization (September 23, 2023). Available at SSRN: https://ssrn.com/abstract=4580819 or http://dx.doi.org/10.2139/ssrn.4580819

Matthew Elliott

University of Cambridge ( email )

Trinity Ln
Cambridge, CB2 1TN
United Kingdom

Matthew O. Jackson (Contact Author)

Stanford University - Department of Economics ( email )

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Stanford, CA 94305-6072
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HOME PAGE: http://www.stanford.edu/~jacksonm

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