Nationalekonomiska institutionen

Ekonomihögskolan vid Lunds universitet

Seminar in Applied Microeconomics: Devaki Ghose


Devaki Ghose, World Bank

Devaki Ghose, World Bank,: “Production Networks and Firm-level Elasticities of Substitution (with Brian Fujiy and Gaurav Khanna)”

Abstract: We use geographic and temporal variation from the Covid-19 lockdowns in India to quantify the fall in trade and estimate elasticities of substitution at the firm-level. Using new real-time administrative tax data on firm-to-firm transactions, we provide one of the first estimates of elasticities of substitution across inputs supplied by suppliers within the same HS-2 industry. This estimate is particularly relevant for the transmission of supply shocks. Not having access to suppliers from strict lockdown zones forced firms to look for alternative suppliers. If suppliers in the lockdown and non lockdown zones are complements rather than substitutes in production, this shock can amplify by further transmitting downstream through the supply chain. We find that even at this very granular supplier level, inputs are highly complementary, with an estimated elasticity 0.38. Causally estimating these micro-level elasticities of substitution at the firm level allows us to understand how shocks propagate through supply chains, and how these propagations affect aggregate GDP

10 november 2021


This is an online meeting.


Bengt Söderlund