The Length and Structure of Norwegian Production Chains: Evidence from Global Input–Output Networks
This study utilizes OECD Inter-Country Input–Output data to demonstrate that while Norwegian production chains have modestly lengthened and become more geographically diverse with increased reliance on China and indirect European intermediaries, traditional trade metrics fail to capture these complex upstream dependencies, highlighting the value of Average Propagation Length (APL) for assessing economic exposure and supply-chain resilience.
Original paper licensed under CC BY 4.0 (https://creativecommons.org/licenses/by/4.0/). This is an AI-generated explanation of the paper below. It is not written or endorsed by the authors. For technical accuracy, refer to the original paper. Read full disclaimer
Economic life is rarely a straight line from a factory to a shopper. Behind the price tag on a product lies a hidden geography of production, a chain of steps where raw materials are gathered, processed, assembled, and shipped across borders before reaching a final destination. For decades, economists have measured the strength of these connections by counting how much money flows between industries. If a car factory buys a lot of steel, the steel industry is considered a vital partner. However, this traditional view misses a crucial detail: the distance the steel traveled to get there. A piece of metal might arrive directly from a neighboring mine, or it might have passed through three other countries and four different factories before it was ready to be used. Understanding the length of these chains matters because longer paths mean more places where a disruption—a strike, a natural disaster, or a trade dispute—can stop the flow of goods.
A new study by Mohamed Badr at the Norwegian University of Science and Technology explores exactly this hidden distance within the Norwegian economy. By mapping the production chains of Norway from 1995 to 2022, the research reveals how the country's economic ties have stretched and shifted over time. The study does not just look at who buys from whom; it counts the number of steps involved in those transactions. This approach allows the researchers to see that while some industries rely on deep, multi-layered networks of suppliers, others depend on shorter, more direct routes. The findings challenge the idea that economic strength is always about how much is traded, suggesting instead that the structure of those trades—how many hands they pass through—is a distinct and vital piece of the puzzle.
To uncover these patterns, the researchers used a massive global database that tracks how industries in different countries exchange goods and services. They focused on Norway, treating it as the central point of the map, and traced every step backward from Norwegian factories to their original sources. They looked at two main things: the total volume of inputs required to make a product, and the average number of production stages those inputs passed through. Think of it as measuring both the weight of a backpack and the number of miles it has traveled. In 1995, the researchers found that these two measurements were somewhat linked; industries with heavy requirements often had long chains. But by 2022, that link had weakened significantly. The data showed that the length of a supply chain and the sheer size of the economic dependency had become two separate stories. An industry could have a massive need for materials without those materials traveling through a long, complex network, or it could rely on a very long chain of suppliers that represented a smaller total volume of trade.
The study found that, on average, Norwegian production chains did get slightly longer between 1995 and 2022. Out of 49 major industries tracked, 37 saw their supply chains extend by a few steps. This trend was not unique to Norway; most of the other countries the researchers compared it to, including Germany and South Korea, also saw their chains lengthen. However, the change in Norway was modest compared to its neighbors. While Sweden, Denmark, and Finland saw more dramatic increases in the length of their production chains, Norway's growth was more restrained. This suggests that while the global economy is becoming more fragmented and specialized, Norway's specific mix of industries, which includes a heavy reliance on oil and gas extraction, may have insulated it from the same degree of structural change seen in manufacturing-heavy economies.
When the researchers looked at where these chains led, a clear picture of Norway's economic geography emerged. The European Union, particularly Sweden and Germany, remains the most critical partner. If these European economies were suddenly removed from the network, Norway's upstream production requirements would drop by more than a quarter. These connections are also the shortest, meaning goods travel through fewer intermediate steps to reach Norway. In contrast, China has become a much more significant source of materials for Norway. While the total volume of trade with China has grown substantially, the path to get there is notably longer. On average, a product sourced from China passes through more intermediate stages than one from Europe or the United States. This means that while European ties are short and dense, the connection to China is deep and winding, involving many more steps in the global production process.
Perhaps the most revealing part of the study is how these chains actually connect. The researchers discovered that Norway's links to major partners like China are not direct lines but are woven through other countries. When tracing the path of a Chinese component arriving in a Norwegian factory, the data showed that it often passes through other European nations first. Germany, Sweden, and Poland act as important intermediaries, handling the goods before they reach Norway. Similarly, connections to the United States often route through Ireland or Canada. This finding highlights that direct trade statistics tell an incomplete story. A country might appear to have a small direct trade relationship with a distant nation, yet be deeply dependent on that nation's output because it flows through a web of intermediate partners.
The implications of these findings extend to how we think about economic security and resilience. If a supply chain is long and passes through many countries, a disruption in any single one of those countries can ripple all the way to the final product. The study suggests that relying only on direct trade numbers gives a false sense of security. An industry might look stable because its direct suppliers are reliable, but it could be vulnerable to a shock happening in a country three steps away in the chain. For Norway, this means that its economic exposure is not just about who it buys from directly, but about the entire network of steps that bring those goods to its shores. The research concludes that to truly understand the risks and strengths of a modern economy, we must look beyond the immediate transaction and map the full, often winding, journey of production.
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