Working paper

• Friend-of-a-Friend in Production Networks: Micro Estimates and Macro Implications, 2025 (joint with Makoto Nirei), submitted

  • Wequantify the friend-of-a-friend effect in production networks, where shared partners act as relational capital facilitating new links. We develop a general equilibrium (GE) model that endogenizes link formation and incorporates the friend-of-a-friend mechanism. We show the model reduces to a dyad-level logit specification, enabling estimation via a quadruple-based conditional logit. Using Japanese firm-to-firm trans action data, we find a sizable friend-of-a-friend effect, comparable in magnitude to the effects of geographical distance and sectoral proximity. Counterfactual simulations in a calibrated GE model indicate that eliminating the mechanism reduces aggregate output by 0.6% and reshapes firm-level shock propagation by changing network topology.

• Inter-Firm Network Growth Over the Firm Life Cycle and Its Macroeconomic Implications, 2025 (joint with Makoto Nirei), [slide]

  • This paper investigates the network growth pattern of young firms and its macroeconomic implications. Using panel data on firm-to-firm trade and financial surveys in Japan, we show that young firms face delays in acquiring new partners due to matching frictions, even after accounting for typical age-dependent growth factors. To explain this pattern, we develop a general equilibrium model incorporating dynamic network formation of heterogeneous firms, distorted by an age-specific networking wedge. Using the calibrated model, we identify the macroeconomic significance of the wedge. The elimination of this wedge raises welfare by 2.4% through faster network formation of young firms and reorganized supply chains. Furthermore, when comparing two policy simulations—one promoting supplier accumulation and the other promoting customer accumulation—we find that the former is twice as effective in improving welfare, due to the difference in the efficiency of the two resulting network structures across the entire economy.

• Disentangling Supply and Demand Shocks in a Networked Economy, 2025 (joint with Daisuke Fujii and Taisuke Nakata), submitted

  • We develop a multi-sector general-equilibrium model with production networks that can be used to identify sector-level supply and demand shocks from observed price and output data. In our model, decreasing returns to scale in production create an upward-sloping supply curve at the sector level. Applying our model to the COVID-19 crisis in Japan, we find that negative demand shocks were the key driver of the economic downturn in 2020 and that negative supply shocks mitigated the decline in prices. We also find that sector-level demand stimulus can increase real GDP and that its effects depend importantly on targeted sectors.