Modeling the Evolution of Production Networks

This project develops a dynamic model of production networks that evolve over time as sectors substitute inputs and adapt to new technologies such as AI. We extend the static input–output framework of Atalay (2017) to include time-varying coefficients driven by CES cost minimization and partial adjustment dynamics. Using BEA data and elasticity estimates, we simulate how gradual rewiring of supply chains changes propagation of sectoral shocks and long-run productivity. The result is a tractable framework for quantifying technological diffusion and network resilience under realistic adjustment speeds.