Hierarchical communities in the walnut structure of the Japanese production network

TL;DR

This paper analyzes the complex hierarchical structure of the Japanese production network, revealing a walnut-shaped core-periphery organization and community structures that challenge traditional input-output analysis methods.

Contribution

It introduces a detailed analysis of the Japanese production network's hierarchical community structure using the Infomap method, highlighting the walnut shape and community composition.

Findings

The network has a walnut-shaped core-periphery structure.

Most communities are at the second hierarchical level.

Community composition reflects industrial and regional characteristics.

Abstract

This paper studies the structure of the Japanese production network, which includes one million firms and five million supplier-customer links. This study finds that this network forms a tightly-knit structure with a core giant strongly connected component (GSCC) surrounded by IN and OUT components constituting two half-shells of the GSCC, which we call a\textit{walnut} structure because of its shape. The hierarchical structure of the communities is studied by the Infomap method, and most of the irreducible communities are found to be at the second level. The composition of some of the major communities, including overexpressions regarding their industrial or regional nature, and the connections that exist between the communities are studied in detail. The findings obtained here cause us to question the validity and accuracy of using the conventional input-output analysis, which is expected to be useful when firms in the same sectors are highly connected to each other.