IDEAS home Printed from https://ideas.repec.org/p/fip/fedhwp/wp-2011-12.html
   My bibliography  Save this paper

Business networks, production chains and productivity: A theory of input-output architecture

Author

Listed:
  • Ezra Oberfield

Abstract

This paper studies an analytically tractable model of the formation and evolution of chains of production. Over time, entrepreneurs accumulate techniques to produce their good using goods produced by other entrepreneurs and labor as inputs. The value of a technique depends on both the productivity embodied in the technique and the cost of the particular input; when producing, each entrepreneur selects the technique that delivers the best combination. The collection of known production techniques form a dynamic network of potential chains of production: the input-output architecture of the economy. Aggregate productivity depends on whether the lower cost firms are the important suppliers of inputs. When the share of intermediate goods in production is high, the lower cost firms are selected as suppliers more frequently. This raises aggregate productivity and also increases the concentration of sales of intermediate goods.

Suggested Citation

  • Ezra Oberfield, 2011. "Business networks, production chains and productivity: A theory of input-output architecture," Working Paper Series WP-2011-12, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-2011-12
    as

    Download full text from publisher

    File URL: http://www.chicagofed.org/digital_assets/publications/working_papers/2011/wp2011_12.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Andrew T. Foerster & Pierre-Daniel G. Sarte & Mark W. Watson, 2011. "Sectoral versus Aggregate Shocks: A Structural Factor Analysis of Industrial Production," Journal of Political Economy, University of Chicago Press, vol. 119(1), pages 1-38.
    2. Thomas Chaney, 2014. "The Network Structure of International Trade," American Economic Review, American Economic Association, vol. 104(11), pages 3600-3634, November.
    3. Kelly, M., 1996. "The Dynamics of Smithian growth," Papers 96/9, College Dublin, Department of Political Economy-.
    4. Morgan Kelly, 1997. "The Dynamics of Smithian Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 939-964.
    5. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2010. "Cascades in Networks and Aggregate Volatility," NBER Working Papers 16516, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Baldwin, Richard E & Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," Journal of Economic Growth, Springer, vol. 6(1), pages 5-37, March.
    2. Jeffrey D. Sachs & Xiaokai Yang & Dingsheng Zhang, 1999. "Trade Pattern and Economic Development when Endogenous and Exogenous Comparative Advantages Coexist," CID Working Papers 03A, Center for International Development at Harvard University.
    3. Daron Acemoglu & Vasco M. Carvalho & Asuman Ozdaglar & Alireza Tahbaz‐Salehi, 2012. "The Network Origins of Aggregate Fluctuations," Econometrica, Econometric Society, vol. 80(5), pages 1977-2016, September.
    4. Peretto, Pietro F., 2015. "From Smith to Schumpeter: A theory of take-off and convergence to sustained growth," European Economic Review, Elsevier, vol. 78(C), pages 1-26.
    5. Xavier Ragot, 2003. "Croissance et division du travail," Sciences Po publications info:hdl:2441/4cufqrm9749, Sciences Po.
    6. Jeffrey D. Sachs & Xiaokai Yang, 1999. "Gradual Spread of Market-Led Industrialization," CID Working Papers 11A, Center for International Development at Harvard University.
    7. Cassidy, Daniel & Hanley, Nick, 2020. "Regional market integration and the emergence of a Scottish national grain market," eabh Papers 20-05, The European Association for Banking and Financial History (EABH).
    8. Vasco Carvalho & Xavier Gabaix, 2013. "The Great Diversification and Its Undoing," American Economic Review, American Economic Association, vol. 103(5), pages 1697-1727, August.
    9. Lüger, Tim, 2018. "The principle of population vs. the Malthusian trap: A classical retrospective and resuscitation," Darmstadt Discussion Papers in Economics 232, Darmstadt University of Technology, Department of Law and Economics.
    10. Murata, Yasusada, 2008. "Engel's law, Petty's law, and agglomeration," Journal of Development Economics, Elsevier, vol. 87(1), pages 161-177, August.
    11. Nadezhda Malysheva & Pierre-Daniel G. Sarte, 2011. "Sectoral disturbances and aggregate economic activity," Economic Quarterly, Federal Reserve Bank of Richmond, vol. 97(2Q), pages 153-173.
    12. Pedro P Romero & Ricardo López & Carlos Jiménez, 2018. "Sectoral networks and macroeconomic tail risks in an emerging economy," PLOS ONE, Public Library of Science, vol. 13(1), pages 1-17, January.
    13. Guillaume Daudin, 2002. "Coûts de transaction et croissance : un modèle à partir de la situation de la France du XVIIIe siècle," Revue Française d'Économie, Programme National Persée, vol. 17(2), pages 3-36.
    14. Xiaokai Yang & Dingsheng Zhang, 1999. "International Trade and Income Distribution," CID Working Papers 18, Center for International Development at Harvard University.
    15. Daron Acemoglu & Asuman Ozdaglar & Alireza Tahbaz-Salehi, 2013. "The Network Origins of Large Economic Downturns," NBER Working Papers 19230, National Bureau of Economic Research, Inc.
    16. Wei Bin Zhang, 2015. "Progressive Income Taxation and Economic Growth with Endogenous Labor Supply and Public Good," European Journal of Economics and Business Studies Articles, European Center for Science Education and Research, vol. 1, September.
    17. Martin Uebele & Daniel Gallardo-Albarr�n, 2015. "Paving the way to modernity: Prussian roads and grain market integration in Westphalia, 1821-1855," Scandinavian Economic History Review, Taylor & Francis Journals, vol. 63(1), pages 69-92, March.
    18. Zhang W.B., 2015. "Birth And Mortality Rates, Gender Division Of Labor, And Time Distribution In The Solow Growth Model," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 24(1), pages 121-134.
    19. Baomin Dong & Jiong Gong, 2014. "Velocity of Money and Economic Development in Medieval China: The case of Northern Song," Review of Development Economics, Wiley Blackwell, vol. 18(2), pages 203-217, May.
    20. Ulrich Pfister & Georg Fertig, 2020. "From Malthusian Disequilibrium to the Post-Malthusian Era: The Evolution of the Preventive and Positive Checks in Germany, 1730–1870," Demography, Springer;Population Association of America (PAA), vol. 57(3), pages 1145-1170, June.

    More about this item

    Keywords

    Productivity; Labor market;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedhwp:wp-2011-12. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/frbchus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.