The paper analyzes how (production and financial) inter-firmnetworks can affect firms’ default probabilities and observed defaultrates. A simple theoretical model of shock transfer is built toinvestigate some stylized facts on how firm-idiosyncratic shocks areallocated in the network, and how this allocation changes firmdefault probabilities. The model shows that the network works as aperfect “risk-pooling” mechanism, when it is both strongly connectedand symmetric. But the “risk-sharing” does not necessarily reducedefault rates, unless the shock firms face is lower on average thantheir financial capacity. Conceived as cases of symmetric inter-firmnetworks, industrial districts might have a comparativedisadvantage in front of heavy crises.

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

Montresor S;
2012

Abstract

The paper analyzes how (production and financial) inter-firmnetworks can affect firms’ default probabilities and observed defaultrates. A simple theoretical model of shock transfer is built toinvestigate some stylized facts on how firm-idiosyncratic shocks areallocated in the network, and how this allocation changes firmdefault probabilities. The model shows that the network works as aperfect “risk-pooling” mechanism, when it is both strongly connectedand symmetric. But the “risk-sharing” does not necessarily reducedefault rates, unless the shock firms face is lower on average thantheir financial capacity. Conceived as cases of symmetric inter-firmnetworks, industrial districts might have a comparativedisadvantage in front of heavy crises.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/20.500.12571/2813
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