Hiroyuki ASAI - Research

Working paper

Inter-Firm Network Growth Along Firm Life Cycle and its Macroeconomic Implications, 2025 (joint with Makoto Nirei)
- 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.

Work in progress:

Friend-of-a-Friend in Production Networks: Micro Estimates and Macro Implications, 2025 (joint with Makoto Nirei), WP coming soon
Disentangling Supply and Demand Shocks in a Network Economy, 2025 (joint with Daisuke Fujii and Taisuke Nakata, associated with the Balancing Infection Prevention and Economic Activity project), WP coming soon

Non-refereed work:

SME Policy Reform in the Networked Economy: Reallocation and Network Destruction, 2023
- This paper studies the dynamic welfare implications of cutting subsidies for Small and Medium Enterprises (SMEs) in an economy where firms are interdependent through production networks. The subsidy policy reform reallocates resources from inefficient small firms to efficient large firms by expelling small firms from the economy, and can improve welfare in the long run. In the short run, however, the exit of small firms destroys production networks and damages large firms’ production in the networked economy. To study the two countering effects on welfare, we develop a general equilibrium model with firms’ exit decisions and an endogenous formation of firm-level production networks. Using the model, we first characterize how the small firms’ exit destroys production networks and damages other firms in the networked economy. Next, using calibrated models, we quantitatively show that the network destruction effect surpasses the reallocation effect in the short run, and the economy falls into a temporary recession just after the policy reform. In the long run, the networks are reconstructed, and welfare is improved through the reallocation of labor.
A Macro Model with Input-Output Networks, 2025 (joint with Daisuke Fujii and Takafumi Kawakubo)