Working Paper: NBER ID: w21251
Authors: Dominick Bartelme; Yuriy Gorodnichenko
Abstract: Specialization is a powerful source of productivity gains, but how production networks at the industry level are related to aggregate productivity in the data is an open question. We construct a database of input-output tables covering a broad spectrum of countries and times, develop a theoretical framework to derive an econometric specification, and document a strong and robust relationship between the strength of industry linkages and aggregate productivity. We then calibrate a multisector neoclassical model and use alternative identification assumptions to extract an industry-level measure of distortions in intermediate input choices. We compute the aggregate losses from these distortions for each country in our sample and find that they are quantitatively consistent with the relationship between industry linkages and aggregate productivity in the data. Our estimates imply that the TFP gains from eliminating these distortions are modest but significant, averaging roughly 10% for middle and low income countries.
Keywords: No keywords provided
JEL Codes: C67; O11; O47
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strength of industry linkages (L69) | aggregate productivity (E23) |
| average output multiplier (AOM) (C67) | output per worker (E23) |
| eliminating distortions (H31) | productivity gains (O49) |
| distortions in intermediate goods (F12) | cross-country productivity variation (O47) |