Reconstructing firm-level interactions in the Dutch input-output network from production constraints

Recent crises have shown that the knowledge of the structure of input-output networks, at the firm level, is crucial when studying economic resilience from the microscopic point of view of firms that try to rewire their connections under supply and demand constraints. Unfortunately, empirical inter-firm network data are protected by confidentiality, hence rarely accessible. The available methods for network reconstruction from partial information treat all pairs of nodes as potentially interacting, thereby overestimating the rewiring capabilities of the system and the implied resilience. Here,... Mehr ...

Verfasser: Ialongo, Leonardo Niccolò
de Valk, Camille
Marchese, Emiliano
Jansen, Fabian
Zmarrou, Hicham
Squartini, Tiziano
Garlaschelli, Diego
Dokumenttyp: Artikel
Erscheinungsdatum: 2022
Schlagwörter: Entropy / network / production network / input-output economic / statistical mechanic / Netherland / maximum entropy mode / Settore FIS/02 - Fisica Teorica / Modelli e Metodi Matematici / Settore SECS-S/01 - Statistica
Sprache: Englisch
Permalink: https://search.fid-benelux.de/Record/base-27437711
Datenquelle: BASE; Originalkatalog
Powered By: BASE
Link(s) : http://hdl.handle.net/11384/123522

Recent crises have shown that the knowledge of the structure of input-output networks, at the firm level, is crucial when studying economic resilience from the microscopic point of view of firms that try to rewire their connections under supply and demand constraints. Unfortunately, empirical inter-firm network data are protected by confidentiality, hence rarely accessible. The available methods for network reconstruction from partial information treat all pairs of nodes as potentially interacting, thereby overestimating the rewiring capabilities of the system and the implied resilience. Here, we use two big data sets of transactions in the Netherlands to represent a large portion of the Dutch inter-firm network and document its properties. We, then, introduce a generalized maximum-entropy reconstruction method that preserves the production function of each firm in the data, i.e. the input and output flows of each node for each product type. We confirm that the new method becomes increasingly more reliable in reconstructing the empirical network as a finer product resolution is considered and can, therefore, be used as a realistic generative model of inter-firm networks with fine production constraints. Moreover, the likelihood of the model directly enumerates the number of alternative network configurations that leave each firm in its current production state, thereby estimating the reduction in the rewiring capability of the system implied by the observed input-output constraints.