Autarchy Along the Distribution
29 Pages Posted: 10 Dec 2020
Date Written: November 13, 2020
We measure the share of foreign value added embedded in the domestic consumption expenditure of the Italian household sector as a whole and of households along the distribution of consumption expenditure. We find that for each euro spent for consumption by households, almost irrespective of their affluence, about 20 to 40 cents remunerate foreign production factors; around two fifths of this foreign value added originate in other euro-area countries. Because of their heterogeneous bundles, households consume foreign value added through different expenditure items; less affluent ones do so through price-inelastic varieties and necessities.
Keywords: global value chains, foreign and domestic value added, distribution of households’ consumption expenditure, exchange-rate shocks, international policy transmission
JEL Classification: D39, E21, F42, F45
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