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Income Differences, Productivity, and Input-Output Networks

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  • Harald Fadinger
  • Christian Ghiglino
  • Mariya Teteryatnikova

Abstract

We study the importance of input-output (IO) linkages and sectoral productivity (TFP) in determining cross-country income differences. We find that while highly connected sectors are more productive than the typical sector in poor countries, the opposite is true in rich ones. To assess the quantitative role of linkages and sectoral TFP differences in cross-country income differences, we decompose cross-country income variation using a multisector general equilibrium model. We find that IO linkages substantially amplify fundamental sectoral TFP variation, but this amplification is significantly weaker than the one suggested by a simple IO model with an aggregate intermediate good.

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  • Harald Fadinger & Christian Ghiglino & Mariya Teteryatnikova, 2022. "Income Differences, Productivity, and Input-Output Networks," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(2), pages 367-415, April.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:2:p:367-415
    DOI: 10.1257/mac.20180342
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    Cited by:

    1. Sen, A., 2024. "Structural Change at a Disaggregated Level: Sectoral Heterogeneity Matters," Janeway Institute Working Papers 2410, Faculty of Economics, University of Cambridge.
    2. Antonio Navas & Antonella Nocco, 2021. "Trade liberalization, selection, and technology adoption with vertical linkages," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 979-1012, September.
    3. Kame Babilla, Thierry U., 2023. "Digital innovation and financial access for small and medium-sized enterprises in a currency union," Economic Modelling, Elsevier, vol. 120(C).
    4. Paul, Saumik & Raju, Dhushyanth, 2023. "Nonlinear Propagation of Sectoral Productivity Shocks with Variable Elasticities of Substitution," IZA Discussion Papers 16611, Institute of Labor Economics (IZA).
    5. Ahmad Zia Wahdat & Jayson L. Lusk, 2023. "The Achilles heel of the U.S. food industries: Exposure to labor and upstream industries in the supply chain," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(2), pages 624-643, March.
    6. Yoshiyuki ARATA, 2020. "The Role of Granularity in the Variance and Tail Probability of Aggregate Output," Discussion papers 20027, Research Institute of Economy, Trade and Industry (RIETI).
    7. Charlie Joyez & Raja Kali & Catherine Laffineur, 2023. "Occupational Coherence and Local Labor Market Performance: Evidence from France," GREDEG Working Papers 2023-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.

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    More about this item

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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