Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/298351 
Year of Publication: 
2023
Series/Report no.: 
NBB Working Paper No. 443
Publisher: 
National Bank of Belgium, Brussels
Abstract: 
We investigate the effects of input variety creation and destruction on both micro- and macroeconomic outcomes using detailed data from Belgium. Our microeconomic analysis establishes that the elasticity of downstream firms' marginal cost to supplier separation captures the area under the input demand curve, and this elasticity can be utilized to calibrate love-of-variety and Schumpeterian models. Empirically, we estimate that marginal costs rise by 0.6% for every 1% of suppliers lost. Our macroeconomic analysis develops a growth-accounting framework that captures the role 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.
Subjects: 
growth
churn
exit
entry
JEL: 
D21
D22
E10
Document Type: 
Working Paper

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