Large-scale structure of a nation-wide production network

TL;DR

This paper analyzes a large-scale production network of a nation, revealing its complex structure, community modules, and failure propagation dynamics using advanced statistical physics methods.

Contribution

It provides the first comprehensive empirical analysis of a nationwide production network, uncovering its scale-free, disassortative, and community structures.

Findings

Scale-free degree distribution observed

Community structure with sectoral and regional modules identified

Failure chains and avalanche-size distributions analyzed

Abstract

Production in an economy is a set of firms' activities as suppliers and customers; a firm buys goods from other firms, puts value added and sells products to others in a giant network of production. Empirical study is lacking despite the fact that the structure of the production network is important to understand and make models for many aspects of dynamics in economy. We study a nation-wide production network comprising a million firms and millions of supplier-customer links by using recent statistical methods developed in physics. We show in the empirical analysis scale-free degree distribution, disassortativity, correlation of degree to firm-size, and community structure having sectoral and regional modules. Since suppliers usually provide credit to their customers, who supply it to theirs in turn, each link is actually a creditor-debtor relationship. We also study chains of failures or bankruptcies that take place along those links in the network, and corresponding avalanche-size distribution.