The Global Economy at the Firm-Level

Following the seminal work of Wassily Leontief, input-output analysis has been used to study the impact of one sector's outputs on the inputs to other sectors. With its computational advantages and breadth of application, input-output analysis widely used to study the impact of sectoral shocks ranging in source international, to environmental, to security. Advances in data collection make increasingly clear the role of firm-level shocks and their aggregate impacts. We contribute an approach that uses data on customer-supplier relationships for firm-level input-output analysis. We overcome challenges of missing data through inference techniques. We present estimate a true firm-level model with global input-output linkages to estimate the potential aggregate impacts of firm level shocks and empirically analyze the contributions of network structure to latent systemic risk. We find that idiosyncratic firm-level shocks can account for meaningful impacts to aggregate output, that firms posing risk of significant impacts vary across sectors, and that the latent systemic risk varies across countries within the global interfirm network.