Upstreamness in production networks
- Review the takeaways from the production networks module
4. Concluding Thoughts on Production Networks
A production network is a conceptualization of the economy that explicitly takes account of the linkages among producing entities (such as industries), where each entity purchases inputs from other entities, combines those inputs to create an output, and then sells that output to some combination of other entities and final consumers.
Production networks provide a powerful way to look at economies because they allow us to see how, and in what ways, different parts of the economy are connected. For example, when the price of an important input—such as oil—suddenly increases, production networks can be a helpful lens through which to understand how the economy will be impacted.
In the case of the United States, we saw that although industries tend to have connections throughout the production network, some industries can be thought of as more "upstream" than others. These upstream industries are, in some sense, farther away from final consumers, in that they tend to sell their outputs to other industries (that, in turn, sell their outputs to other industries) rather than to final consumers.
This module has just scratched the surface of the topics that can be considered with production networks. We plan to continue adding content that delves into other aspects in more detail.