Publication:
Production Networks and Firm-level Elasticities of Substitution

Loading...
Thumbnail Image
Files in English
English PDF (2.29 MB)
38 downloads
English Text (229.98 KB)
8 downloads
Date
2024-05-23
ISSN
Published
2024-05-23
Abstract
This paper provides one of the first estimates of elasticities of substitution across suppliers within the same product. This paper estimates these elasticities using new real-time administrative tax data on firm-to-firm transactions, with product-level prices and quantities, leveraging geographic and temporal variation from India’s Covid-19 lockdowns to derive causal estimates of these elasticities. Suppliers are highly complementary even at this granular level, with an estimated elasticity of 0.55. The paper shows that the quality of institutions, input specificity, inventories, and time horizons explain the low elasticity. These firm-level complementarities amplify the propagation of negative shocks through production networks, and make connected firms important for shock propagation. In policy counterfactuals, the paper shows that given these complementarities, allowing more connected firms to operate in the face of shocks mitigates output declines non-linearly with the size of the productivity shock.
Link to Data Set
Citation
Fujiy, Brian C.; Ghose, Devaki; Khanna, Gaurav. 2024. Production Networks and Firm-level Elasticities of Substitution. Policy Research Working Paper; 10782. © Washington, DC: World Bank. http://hdl.handle.net/10986/41586 License: CC BY 3.0 IGO.
Report Series
Report Series
Other publications in this report series
  • Publication
    Disaster Risk Preparedness of Households in the Caribbean
    (Washington, DC: World Bank, 2024-06-18) Anglade, Boaz; Cucagna, Emilia; de Hoop, Jacobus; Paffhausen, Anna Luisa
    Preparing for—and responding to—disasters requires a people-centered approach and a strong understanding of households’ ability to cope with shocks. Relying on novel household survey data, this paper examines the ability of households in the Caribbean to cope with disasters caused by natural hazards. The analysis sheds light on disaster preparedness in five “data deprived” countries: Belize, Dominica, Haiti, Saint Lucia, and Suriname. The analysis points to a clear income gradient in possession of emergency supplies needed to cope with disasters. This gradient can be observed at both the country and household levels. In contrast, no such income gradient is observed for other key elements of preparation for disasters: community disaster management systems and discussion of risk mitigation strategies within households (both of which are common in the Caribbean hurricane belt). There is substantial variation in preparedness to cope with disasters across sociodemographic groups, as households with less educated heads, with children, and residing in rural areas are generally less able to handle disasters. All in all, a large share of households in all five countries indicates that they are not prepared to cope with a natural disaster. The COVID-19 pandemic had a negative impact on disaster risk preparedness, primarily due to households’ deteriorating financial circumstances.
  • Publication
    The Influence of COVID-19 on Young Women’s Labor Market Aspirations and Expectations in India
    (Washington, DC: World Bank, 2024-06-18) Anukriti, S; Herrera-Almanza, Catalina; Ochmann, Sophie
    Youth unemployment and gender gaps in labor market outcomes are key policy challenges across developing countries. Young job-seekers may struggle to find jobs because of their biased beliefs and unrealistic aspirations about the labor market. This study examines whether exposure to the COVID-19 pandemic influenced the labor market aspirations and expectations of female vocational students in Haryana, India. Exposure to the pandemic lowered young women’s wage aspirations and made them more realistic, especially in rural areas. A potential mechanism for these effects was the decline in rural women’s willingness to migrate for work due to the pandemic.
  • Publication
    Distributional Effects of Taxation of Processed Foods in Brazil
    (Washington, DC: World Bank, 2024-06-17) Coelho, Bernardo D. P.; Ivins, Courtney; Iunes, Roberto
    This paper examines the potential distributional effects of a tax increase on processed and ultra-processed foods. Using data from the most recent Brazilian consumption survey (POF 2017/2018), it analyzes the welfare changes that households would experience when facing increased costs for these products. Using an extended cost-benefit analysis model to assess net income effects, the paper considers three distinct dimensions: changes in product expenditure, changes in medical expenditure, and changes in years of life lost. The findings suggest that the tax increase would have a progressive impact, benefiting households at the lower end of the consumption distribution in all three dimensions. Overall, the study highlights the potential for targeted taxation policies as a “triple win” to address health concerns, promote greater equity, and increase fiscal revenues.
  • Publication
    Trade Effects of Industrial Policies
    (Washington, DC: World Bank, 2024-06-17) Barattieri, Alessandro; Mattoo, Aaditya; Taglioni, Daria
    This paper explores the effects of industrial policy on trade, focusing on the role of preferential trade agreements. The analysis uses data for the period 2012–2022 on detailed product-level bilateral trade, industrial policy announcements, and rules on subsidies in different preferential trade agreements. The introduction of a new industrial policy measure in a destination market reduces export growth to that market on average by about 0.28 percent. However, exports from fellow members of preferential trade agreements are not adversely affected and may even be positively affected if the agreements have deep disciplines on subsidies. These findings suggest that preferential trade agreements have a shielding effect against the trade distorting effects of industrial policies.
  • Publication
    Household Business Performance in Ghana
    (Washington, DC: World Bank, 2024-06-14) Owoo, Nkechi S.; Amankwah, Akuffo; Castaing, Pauline; Palacios-Lopez, Amparo
    The informal sector contributes significantly to the total output and employment of low-income countries. While women-owned businesses feature strongly in these informal environments, they are generally characterized by low productivity. This paper explores how household business performance may be influenced by owners’ personality traits and their attitudes toward gender roles. Using multi-topic household survey data collected in two regions of Ghana, the results show that among female business owners, being organized is an important determinant of business success, while among male business owners, power motivation and tenacity are important factors. However, increasing traditionalism tends to dampen the effects of these personality traits for both genders. Other factors that are positively correlated with women-owned business performance include business registration, separating expenses for home and business purposes, ownership of a business bank account, use of social media, as well as urban location of the business. For men-owned businesses, the results show that those that are located in traditional markets, have bank accounts, and use literate employees in their operations tend to perform better. The findings imply that policies that aim to boost women-owned business performance need to consider the main barriers, especially attitudes toward gender roles, that may determine how businesses operate in these settings. The results also suggest the importance of soft skills to boost business performance among men- and women-owned businesses.
Journal
Journal Volume
Journal Issue
Associated URLs
Associated content
Citations