Analyses of Aggregate Fluctuations of Firm Networks Based on the Self-Organized Criticality Model and Control Theory

This study examines the difference in the size of avalanches among industries triggered by demand shocks, which can be rephrased by control of the economy or fiscal policy, and by using the production-inventory model and observed data. In addition, we investigate how differently demand shocks affect each firm by using control theory that utilizes network topology. We obtain the following results. (1) The size of avalanches follows power law. (2) The mean sizes of avalanches for industries are diverse, but their standard deviations highly overlap. (3) We compare the simulation with an input-output table and with the actual policies and find them to be compatible. (4) The expectations about becoming involved in avalanches are diverse and depend on the industries. (5) It is difficult for service industries and small firms to be affected by the control. On the other hand, mining, manufacturing, and wholesale industries are strongly affected by the control. (6) If we clip a network in descending order of capital size, we do not lose the control effect.

Published: Inoue, Hiroyasu, 2016. "Analyses of aggregate fluctuations of firm production network based on the self-organized criticality model," Evolutionary and Institutional Economics Review, Vol. 13(2), pp. 383-396
https://link.springer.com/article/10.1007/s40844-016-0052-3

Published: Inoue, Hiroyasu, 2017. "Controllability analyses of nation-wide firm networks," Evolutionary and Institutional Economics Review, Vol. 14(2), pp. 335-349
https://link.springer.com/article/10.1007/s40844-017-0076-3