  We study a novel economic network (supply chain) comprised of wire transfers
(electronic payment transactions) among the universe of firms in Brazil (6.2
million firms). We construct a directed and weighted network in which vertices
represent cities and edges connote pairwise economic dependence between cities.
Cities (vertices) represent the collection of all firms in that location and
links denote intercity wire transfers. We find a high degree of economic
integration among cities in the trade network, which is consistent with the
high degree of specialization found across Brazilian cities. We are able to
identify which cities have a dominant role in the entire supply chain process
using centrality network measures. We find that the trade network has a
disassortative mixing pattern, which is consistent with the power-law shape of
the firm size distribution in Brazil. After the Brazilian recession in 2014, we
find that the disassortativity becomes even stronger as a result of the death
of many small firms and the consequent concentration of economic flows on large
firms. Our results suggest that recessions have a large impact on the trade
network with meaningful and heterogeneous economic consequences across
municipalities. We run econometric exercises and find that courts efficiency
plays a dual role. From the customer perspective, it plays an important role in
reducing contractual frictions as it increases economic transactions between
different cities. From the supplier perspective, cities that are central
suppliers to the supply chain seem to use courts inefficiency as a lawsuit
barrier from their customers.
