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SOE: Fachverband Physik sozio-ökonomischer Systeme
SOE 23: Economic Models
SOE 23.4: Talk
Friday, March 31, 2023, 11:45–12:00, ZEU 260
Measuring the Robustness of Production Networks — •Tobias Reisch1, Georg Heiler1,2, Christian Diem1, Peter Klimek1,3, and Stefan Thurner1,3,4 — 1Complexity Science Hub Vienna, Vienna, Austria — 2Institute of Information Systems Engineering, TU Wien, Vienna, Austria — 3Section for Science of Complex Systems, CEMSIIS, Medical University of Vienna, Vienna, Austria — 4Santa Fe Institute, Santa Fe, NM, USA
In modern economies manufacturing happens typically along supply chains. These supply chains intersect and overlap, forming complex networks of production. The failure of single firms in production networks can cause large disruptions. To assess the robustness of economic networks, we develop a firm-level shock spreading model that takes node-specific production functions into account. We define the Economic Systemic Risk Index (ESRI) of a firm as the size of the production interruptions the firm's initial failure causes. First, we apply the new index to the empirical production network of Hungary based on VAT data. Second, we use mobile phone data to reconstruct the production network of a second country that cannot be disclosed. For both countries we find a core of less than 100 high-systemic risk firms that can affect more than 20% of the respective economy. The high-systemic risk core cannot be identified by firm-size. We discuss the network properties that give rise to the observed patterns of systemic risk. Our results contribute to the broader field of network resilience with the introduction of node specific shock spreading dynamics.