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Inequality in economic shock exposures across the global firm-level supply network

For centuries, national economies have been engaging in international trade and production. The resulting international supply networks not only increase wealth for countries, but also allow for economic shocks to propagate across borders.

Using global, firm-level supply network data, we estimate a country’s exposure to direct and indirect economic losses caused by the failure of a company in another country. We show the network of international systemic risk-flows.

We find that rich countries expose poor countries stronger to systemic risk than vice-versa. The risk is highly concentrated, however, higher risk levels are not compensated with a risk premium in GDP levels, nor higher GDP growth.

Our findings put the often praised benefits for developing countries from globalized production in a new light, by relating them to risks involved in the production processes. Exposure risks present a new dimension of global inequality that most affects the poor in supply shock crises.

A. Chakraborty, T. Reisch, C. Diem, P. Astudillo-Estévez, S. Thurner, Inequality in economic shock exposures across the global firm-level supply network, Nature Communications 15 (2024) 3348.

Abhijit Chakraborty

Tobias Reisch © Verena Ahne

Tobias Reisch

Christian Diem © Verena Ahne

Christian Diem

Pablo A. Astudillo Estévez

Stefan Thurner @ Franziska Liehl, President of the Complexity Science Hub

Stefan Thurner

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