Network features in shaping sectors’ responses to the Spillover effects of Covid -19 shocks

Tunisia - 30 November 2022

Trade topics: COVID-19, Tunisia, Supply Chains

As inter-sectoral linkages are being increasingly organized in complex networks, It has become inconceivable to study sectors’ responses to exogenous shocks without considering the nature of these invisible but real linkages Leontief (1941). However, although important, this research field remains poorly analyzed in both the theoretical and empirical literature. In this paper, we aim to investigate how sectors’ network centrality and local density measures impact their responsiveness to sectoral shocks propagating through input output linkages. Using Covid-19 shocks and complex network analysis, we find that sectors’ various centrality and local density measures are correlated with the spillover effects of the supply and demand shocks. More specifically, we find key consumer sectors to bear higher indirect supply shocks, while major supplier sectors to be more vulnerable to the cascade effects of demand shocks. Furthermore, the correlation between sectors’ sub-network characteristics with the indirect shocks has revealed the possibility of the simultaneous occurrence of a mitigation effect along with the contagion effect. Finally, We conclude by stating that, in a network theory framework, the sectoral impact of an exogenous shock not only depends the sector’s relative position in the network but also on the nature of the shock itself.

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