Working Paper: NBER ID: w30849
Authors: George A. Alessandria; Shafaat Y. Khan; Armen Khederlarian; Carter B. Mix; Kim J. Ruhl
Abstract: We study the aggregate effects of supply-chain disruptions in the post-pandemic period in a heterogeneous-firm, general equilibrium model with input-output linkages and a rich set of supply chain frictions: uncertain shipping delays, fixed order costs, and storage costs. Firms optimally hold inventories that depend on the source of supply, domestic or imported. Increases in shipping times are contractionary, raise prices, and increase stockouts, particularly for goods intensive in delayed inputs. These effects are larger when inventories are already at low levels. We fit the model to the U.S. and global economies from 2020–2022 and estimate large aggregate effects of supply disruptions. Our model predicts that the boost in output from reducing delays will be smaller than the contraction from the waning effects of stimulus.
Keywords: Supply Chain Disruptions; Economic Effects; General Equilibrium Model; Inventory Management
JEL Codes: E0; F1; F4
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased shipping times (L87) | contraction of output in the traded goods sector (F41) |
| increased shipping times (L87) | higher prices (D49) |
| increased shipping times (L87) | lower output (E23) |
| increased shipping times (L87) | reduced production incentives (H23) |
| increased shipping times (L87) | greater sales constraints for firms with lower inventories or higher demand (D22) |
| increased shipping times (L87) | delayed recovery due to depleted inventories (D25) |