The Belgian Production Network

Glenn Magerman^1,2, Emmanuel Dhyne^2,3

This presentation covers the overview of a large economic research agenda on firms and production networks in Belgium. Using data on enterprise-to-enterprise transactions for the universe of Belgian enterprises between 2002 and 2014, combined with a myriad of enterprise-level databases, we present several ongoing projects in this agenda. We start with the description of the production network and its characteristics in both cross-sections and dynamics. Then, we turn to the impact of idiosyncratic productivity shocks to individual firms on the aggregate of an economy. We show that idiosyncratic shocks can propagate through the network and generate volatility in GDP in the same order of magnitude as observed GDP. Moreover, only a handful of firms (0.15% or the top 100 firms) contributes to over 90% of the volatility generated by the model. In a related project, we analyse the impact of productivity shocks channeled through imports. In another project centered on international trade, we show that the distance to exports correlates with firm-level productivity. One project looks at the supplier-buyer network from a bilateral perspective and revisits the old question why firms are big. Using a model-based decomposition, we show that 80% of the variation in firm sizes is generated by inter-firm demand. Moreover, the extensive margin (number of suppliers/customers) contributes most to the variation on both the supply side and the demand side. Finally, a last project looks at the geographical constellation of production clusters. We show that there are 6 large clusters in Belgium that are both geographically and sectorally concentrated.