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Analyses of aggregate fluctuations of firm production network based on the self-organized criticality model

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Abstract

This study examines how consecutive productions in firms occur when triggered by demand shocks, which can be rephrased by control of the economy or fiscal policy. We use the production-inventory model and observed data that exhaustively include a production network of Japanese firms. We obtain the following results. (1) The size of consecutive productions follows a power law. (2) The mean sizes of consecutive productions for industries are diverse; however, their standard deviations are sufficiently large that the difference in the mean become less important. (3) We compare the simulation with an input–output table and with the actual policies; they are compatible.

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Correspondence to Hiroyasu Inoue.

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This study is conducted as a part of the project “Price Network and Dynamics of Small and Medium Enterprises” undertaken at the Research Institute of Economy, Trade and Industry (RIETI). The authors thank the institute for various means of support. We thank Hiroshi Yoshikawa, Hideaki Aoyama, Hiroshi Iyetomi, Yuichi Ikeda, Yoshi Fujiwara, Wataru Soma, Yoshiyuki Arata, and members who attended the internal seminar of RIETI for their helpful comments. We gratefully acknowledge financial support from the Japan Society for the Promotion of Science (No. 15K01217).

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Inoue, H. Analyses of aggregate fluctuations of firm production network based on the self-organized criticality model. Evolut Inst Econ Rev 13, 383–396 (2016). https://doi.org/10.1007/s40844-016-0052-3

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