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Technical change and macroeconomic resilience to sectoral shocks

Author

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  • Schwark, Florentine
  • Tryphonides, Andreas

Abstract

The technological advances experienced by many economies during the last decades have fundamentally reshaped production functions. How do such changes affect the transmission of sectoral supply-side shocks to the gross domestic product (Domar weights) and hence macroeconomic resilience? We show that Domar weights decrease with the elasticity of substitution if value added is relatively abundant compared to intermediate inputs in production. Empirical evidence from European sectors suggests that the elasticity of substitution has a stronger effect on resilience today than it had some decades ago, with a clear negative contribution to Germany’s resilience post 2010.

Suggested Citation

  • Schwark, Florentine & Tryphonides, Andreas, 2025. "Technical change and macroeconomic resilience to sectoral shocks," Economics Letters, Elsevier, vol. 246(C).
    • Handle: RePEc:eee:ecolet:v:246:y:2025:i:c:s0165176524005615
    DOI: 10.1016/j.econlet.2024.112077
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    More about this item

    Keywords

    Elasticity of substitution; Domar weights; Resilience; Production Networks;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E25 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Aggregate Factor Income Distribution
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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