Research has found that although counter-intuitive, longer supply chains increase the possibility of ‘ideas-driven progress’.
Experts from the University of Oxford and Harvard University found there was more possibility of ideas-driven progress with a longer supply chain, leading to economic growth.
“We show that production chains accumulate the benefits of technology improvement so that long production chains facilitate faster price reduction in industries and faster GDP growth in economies”, explained James McNerney, Research Associate at Harvard’s Growth Lab and lead author of the study.
“These are latent predictions in standard models that we develop theoretically and show that they bear out in the data.”
In the their paper ‘How production networks amplify economic growth’, the research team said: “The predictions here suggest that, all else equal, an economy will accelerate its growth during the manufacturing stage and relax to slower growth when it becomes more developed.”
The team argues that the research shows nearly half of China’s recent economic growth is attributable to ‘deeper supply chains’ – meaning that the predictions also work in relation to nation-states.