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Network Absorptive Capacity Threshold and Directed Propagation Asymmetry — Evidence from China–US Input-Output Networks

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  • Shi, Yingxin

Abstract

A house is demolished and rebuilt; GDP rises twice, yet the net wealth remains one house- resources flow through the economy without being effectively absorbed. This paper formalizes this intuition: every sector in an industrial network possesses an absorptive capacity κ that measures its ability to transform intermediate inputs into final output. When κ falls below a threshold κ*, the propagation of shocks along upstream and downstream directions becomes systematically asymmetric-upstream cost push can transmit forward through bottlenecks, whereas downstream demand feedback cannot travel backward-preventing capital from completing the full cycle from production to terminal value realization and causing spillover into idling or stagnation. Using 35-sector input-output data for China and the United States from 2000 to 2024, this paper obtains three findings. First, Hansen's endogenous threshold estimation confirms κ* ≈ 0.18, with a highly significant difference in propagation coefficients above and below the threshold (F = 18.92, p

Suggested Citation

  • Shi, Yingxin, 2026. "Network Absorptive Capacity Threshold and Directed Propagation Asymmetry — Evidence from China–US Input-Output Networks," EconStor Preprints 343033, ZBW - Leibniz Information Centre for Economics.
    • Handle: RePEc:zbw:esprep:343033
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    File URL: https://www.econstor.eu/bitstream/10419/343033/1/Network_Absorptive_Capacity.pdf
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    1. Pol Antras & Davin Chor & Thibault Fally & Russell Hillberry, 2012. "Measuring the Upstreamness of Production and Trade Flows," American Economic Review, American Economic Association, vol. 102(3), pages 412-416, May.
    2. Engelbert Stockhammer, 2004. "Financialisation and the slowdown of accumulation," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 28(5), pages 719-741, September.
    3. Shi, Yingxin, 2026. "Network Absorptive Capacity Threshold and Directed Propagation Asymmetry — Evidence from China–US Input-Output Networks," EconStor Preprints 343033, ZBW - Leibniz Information Centre for Economics.
    4. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
    5. Charles F. Manski, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 60(3), pages 531-542.
    6. Hansen, Bruce E., 1999. "Threshold effects in non-dynamic panels: Estimation, testing, and inference," Journal of Econometrics, Elsevier, vol. 93(2), pages 345-368, December.
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    1. Shi, Yingxin, 2026. "Network Absorptive Capacity Threshold and Directed Propagation Asymmetry — Evidence from China–US Input-Output Networks," EconStor Preprints 343033, ZBW - Leibniz Information Centre for Economics.

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