Structural Change in Production Networks and Economic Growth

Paul Gaggl, Aspen Gorry and Christian vom Lehn

No 10460, CESifo Working Paper Series from CESifo

Abstract: This paper studies structural change in production networks for intermediate inputs (input-output network) and new capital (investment network). For each network, we document a declining fraction of production by goods sectors and a rising fraction of production by services sectors. We develop a multisector growth model that admits structural change in production networks along the balanced growth path to study these trends. Disaggregated final expenditure data reveal that inputs to investment production are substitutes, rather than strong complements as suggested by existing work. Hence, resources endogenously reallocate toward the fastest growing producers of investment. Growth accounting exercises demonstrate that investment-specific technical change has risen in importance for aggregate U.S. growth over time, with 20-25% of aggregate growth after 2000 stemming from reallocation induced by structural change. At the same time, productivity growth within the input-output network has stagnated, contributing to the recent slowdown in aggregate growth.

Keywords: structural change; input-output network; investment network; economic growth; technical change; balanced growth (search for similar items in EconPapers)
JEL-codes: E23 O14 O40 O41 (search for similar items in EconPapers)
Date: 2023
New Economics Papers: this item is included in nep-eff, nep-gro, nep-hme and nep-net
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_10460

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