Co-authors: André Victor D. Luduvice, Eugenio Rojas
Affiliation: University of Virginia
Date and time: Wednesday, September 9, 2026 14:30 (Santiago, GMT-3:00)
Location (Hybrid Seminar):

• Sala Constitución at the Central Bank of Chile, Morandé 115, second floor.
• Online meeting

Registration: seminarios@bcentral.cl

Abstract: Production networks do more than propagate shocks: they allocate uninsurable income risk. We show that this allocation matters when markets are incomplete. In a simple model, statically neutral networks generate the same aggregate exposure to primitive shocks while assigning that exposure differently across entrepreneurs. Under complete markets, these networks are equivalent; with only a risk-free asset, precautionary saving depends on the concentration of residual income exposure. We then embed the mechanism in a heterogeneous-agent economy with incomplete markets, sectoral productivity shocks, input-output linkages, and entrepreneurial profit income. A three-sector U.S. calibration disciplined by BEA input-output data and SCF wealth moments shows that network structure changes exposure concentration, precautionary wedges, constrained shares, and sectoral shock amplification. Feeding the 1967–2022 sequence of BEA input-output matrices into the calibrated model, while holding other primitives fixed, shows that the evolution of the U.S. network did not diversify this channel away. Instead, residual exposure rotates toward downstream services, while precautionary wedges and wealth concentration rise moderately. Static network neutrality is therefore not dynamic neutrality.