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Income Differences, Productivity, and Input-Output Networks

Author

Listed:
  • 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.

Suggested Citation

  • 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. Zhu, Chen & Wang, Zekai & Jiang, Qi & Xie, Chang, 2024. "Does industry monopolization widen wage residual inequality In China?," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    2. Ali Sen, 2024. "Structural Change at a Disaggregated Level: Sectoral Heterogeneity Matters," Working Papers 048, The Productivity Institute.
    3. repec:cam:camjip:2410 is not listed on IDEAS
    4. repec:cam:camjip:2431 is not listed on IDEAS
    5. Li, Yue & Zheng, Xiaoxue & Lo, Chu-Ping, 2025. "Technological sanctions and their unintended consequences: Theory and evidence," China Economic Review, Elsevier, vol. 93(C).
    6. Kazekami, Sachiko, 2024. "Linkage, sectoral productivity, and employment spread," Structural Change and Economic Dynamics, Elsevier, vol. 69(C), pages 108-123.
    7. 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.
    8. Sen, A., 2024. "Digitalization and Productivity Growth Slowdown in Production Networks," Cambridge Working Papers in Economics 2472, Faculty of Economics, University of Cambridge.
    9. 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).
    10. Paul, Saumik & Raju, Dhushyanth, 2023. "Nonlinear Propagation of Sectoral Productivity Shocks with Variable Elasticities of Substitution," IZA Discussion Papers 16611, IZA Network @ LISER.
    11. Cheng Dazhong & Tang Yutong & Shao Xinyi, 2025. "Growth of the Service Sector and Economic Fluctuations: A Production Network Perspective," China Finance and Economic Review, De Gruyter, vol. 14(1), pages 23-49.
    12. 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.
    13. Sophie Osotimehin & Latchezar Popov, 2023. "Misallocation and Intersectoral linkages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 177-198, December.
    14. Tiago Cavalcanti & Angelo Mendes & Pierluca Pannella, 2024. "Entrepreneurship and misallocation in production network economies," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(1), pages 29-68, August.
    15. Dalkhjav, Bayarmaa & Rubini, Loris, 2025. "Hidden information as a source of misallocation: An application to the opioid crisis," Journal of Economic Dynamics and Control, Elsevier, vol. 174(C).
    16. 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).
    17. Catherine Laffineur & Charlie Joyez & Raja Kali, 2023. "Occupational Coherence and the Geography of Unemployment," GREDEG Working Papers 2023-20, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France, revised Jul 2025.

    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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