Production network structure, specialization and unemployment: Measuring the structural resilience of national economies

Abstract

Specialization leads to efficient production structures that generate welfare gains, while the resulting interconnectedness of countries spreads shocks more rapidly, making the global economic system more volatile. This paper applies the framework of ecological network analysis to input–output data and captures resilient economic structures between self-sufficiency (redundancy) and extreme specialization (efficiency). Calculating the structural resilience of 69 countries shows that economies are more redundant than ecological systems and moved towards more efficient structures over time. By regressing economic openness on structural characteristics, we find that economically more open economies on the export side are more efficient and less structurally redundant. This reflects that specialization and integration into global supply chains go hand in hand. We also find a significant empirical relationship between structural resilience and changes in unemployment. This finding suggests that measuring the structural resilience of national production networks helps capture the robustness of economic systems.