Research Seminar on 11 October 2023

Dr Girsh Bahal, from the Economics area at the University of Western Australia Business School, will address students and faculty on October 11, 2023 at 4 pm in Classroom P11. His research seminar is on ‘The Effect of Supply Base Diversification on the Propagation of Shocks’.

The seminar is hosted by the Research and Publications Office at IIM Bangalore.

Dr Bahal’s paper studies the role of supply base diversification on the propagation of shocks through pro-duction networks. He and his co-authors identify exogenous shocks with the occurrence of natural disasters in the US between 1978 and 2017. They find that affected suppliers reduce customers’ sales growth by≈25%, on average. Notably, firms with intermediate input purchases spanning many suppliers, geographies, or industries attenuate shocks to their suppliers by≈70-80%. They interpret their empirical findings using a general equilibrium model of production networks. First, they establish that diverse firms exhibit gross substitutability among inputs relative to non-diverse firms, suggesting diverse firms in-sulate themselves by substituting away from disrupted suppliers. They then use the model to estimate the macroeconomic effect of supply base diversity, finding real GDP would have been≈$1.7 trillion lower in 2017 in the absence of diversified firms.