Production and financial linkages in inter-firm networks: structural variety, risk-sharing and resilience

Abstract: 

The paper analyzes how (production and financial) inter-firm networks can affect firms? default probabilities and observed default rates. A simple theoretical model of shock transfer is built to investigate some stylized facts on how firm-idiosyncratic shocks are allocated in the network, and how this allocation changes firm default probabilities. The model shows that the network works as a perfect ?risk-pooling? mechanism, when it is both strongly connected and symmetric. But the ?risk-sharing? does not necessarily reduce default rates, unless the shock firms face is lower on average than their financial capacity. Conceived as cases of symmetric inter-firm networks,

Authors
Authors: 
CAINELLI Giulio, VITTUCCI MARZETTI Giuseppe, MONTRESOR Sandro
Publication Year
Publication Year: 
2012
Type

Type:

Appears in Collections
Appears in Collections: 
Institute for Prospective Technological Studies
Science Areas
JRC Institutes
Publisher
Publisher: 
SPRINGER
ISSN
ISSN: 
0936-9937
Citation
Citation: 
JOURNAL OF EVOLUTIONARY ECONOMICS p. 711-734 no. 4 vol. 22