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From Productivity Shifts to Economic Growth: Intersectoral Linkage as an Amplifying Factor

Author

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  • Nikolay Chernyshev

    () (University of St Andrews)

Abstract

This paper documents the presence of a positive link between the intensity of using intermediates by a country’s industries and its economic growth. We explain the finding by advancing a framework of endogenous growth in an economy with interconnected industries, whereby sectoral productivity growth is amplified by the interconnection, and the degree of amplification grows in the strength of sectoral connections. We use the framework to derive the optimal growth-enhancing structure of an economy, which is when all industries source their intermediates from a single sector (the star network) characterised by the largest concentration potential – a novel indicator which captures how fast is a sector’s productivity growth and how much it itself relies on intermediates.

Suggested Citation

  • Nikolay Chernyshev, 2018. "From Productivity Shifts to Economic Growth: Intersectoral Linkage as an Amplifying Factor," CDMA Working Paper Series 201801, Centre for Dynamic Macroeconomic Analysis.
  • Handle: RePEc:san:cdmawp:1801
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    File URL: http://www.st-andrews.ac.uk/~wwwecon/repecfiles/2/1801.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Economic growth; input-output linkage; production networks;

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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