Supplier Churn and Growth: A Micro-to-Macro Analysis / David Baqaee, Ariel Burstein, Cédric Duprez, Emmanuel Farhi.

Format:

Book

Author/Creator:

Baqaee, David.

Contributor:

National Bureau of Economic Research.

Burstein, Ariel.

Duprez, Cédric.

Farhi, Emmanuel.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31231.

NBER working paper series no. w31231

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

We investigate the effects of input variety creation and destruction on both micro- and macroeconomic outcomes using detailed data from Belgium. We estimate that marginal costs rise by 0.6% for every 1% of suppliers lost. We show that this elasticity measures the area under the input demand curve relative to expenditures, and can be used to calibrate love-of-variety and quality-ladder models. We also develop a macroeconomic growth-accounting framework that quantifies the importance of supply chain churn for aggregate growth. Using firm-level production network data and estimated microeconomic elasticities, we show that supplier churn can plausibly account for a large portion of the trend component of growth in aggregate productivity. Our findings highlight the crucial role of input entry and exit in driving economic growth.

Notes:

Print version record

May 2023.