Domestic Supply Networks of Germany and China and their influence on the income distribution patterns in the context of the 2008 financial crisis

Abstract

In this paper, we present a study of the effects of the 2008 financial crisis on Germany and China's domestic supply networks. We assume that the differences between the domestic structures of each economy can explain the difference in the way each economy experienced the consequences of the financial crisis. Our results show that in Germany, the major effects were spread through the financial services sectors, while in China, the crisis was spread mostly by the non-financial services sectors. In addition, both economies experienced a slight increase in income inequality due to the changes in their domestic supply networks.