Growth Through Industrial Linkages

69 Pages Posted: 27 Nov 2023

See all articles by Alejandro Rojas-Bernal

Alejandro Rojas-Bernal

University of British Columbia (UBC) - Vancouver School of Economics

Xiaojun Guan

University of British Columbia (UBC) - Vancouver School of Economics

Date Written: October 09, 2023

Abstract

In this paper, we estimate how changes in the structure of global input-output networks have influenced growth. Using an open economy production network model, we identify sufficient statistics that characterize how productivity shocks across domestic and foreign firms influence country-level TFP. We estimate these sufficient statistics using data on input-output networks and sectoral productivity shocks. Structural changes in global input-output networks between 1965 and 2000 were advantageous for developing countries and unfavorable for advanced economies. Holding the global input-output network fixed, TFP growth in China and India would have been 26.6% and 9.7% lower between 1965 and 2000. Whereas for the US and Australia, TFP growth would have been 4.0% and 16.8% higher. Finally, we show that the dynamics of the domestic intermediate input cost share capture the importance that the structure of the global input-output network has on the amplification of shocks on TFP. Our analysis illustrates the importance of industrial linkages and robust domestic intermediate input markets for economic growth.

Keywords: Production Networks, Open Economy, TFP, Supply Chains, Industrial Linkages

JEL Classification: C67, D24, D33, D57, D85, E25, E32, F16, F20, F41, F42, F62

Suggested Citation

Rojas-Bernal, Alejandro and Guan, Xiaojun, Growth Through Industrial Linkages (October 09, 2023). Available at SSRN: https://ssrn.com/abstract=4615611 or http://dx.doi.org/10.2139/ssrn.4615611

Alejandro Rojas-Bernal (Contact Author)

University of British Columbia (UBC) - Vancouver School of Economics ( email )

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Vancouver, BC V6T 1L4
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HOME PAGE: http://www.alejandrorojasbernal.com/

Xiaojun Guan

University of British Columbia (UBC) - Vancouver School of Economics ( email )

6000 Iona Dr
Vancouver, BC V6T 1L4
Canada

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