Sectoral Shocks and Home Substitution

Alessio Moro and Satoshi Tanaka

No 602, Discussion Papers Series from University of Queensland, School of Economics

Abstract: We show that effects of a sectoral shock on the composition of sectoral shares crucially depend on whether the goods produced in the sector are home-substitutable or not. When a productivity shock hits the market sector that produces non-home-substitutable goods (e.g. manufacturing goods), the shock largely affects the composition of consumption shares of market sectors. On the other hand, when a shock hits the market sector that produces home-substitutable goods (e.g. service goods), relocation in shares mainly occur between the sector and the home sector. We compare our results to those of the traditional three-sector model without a home sector, and show that the missing of the home substitution effects predicts completely different implications for the response of consumption shares to sectoral shocks.

Keywords: Sectoral Shocks; Home Production; Services Sector (search for similar items in EconPapers)
JEL-codes: E21 E32 L16 (search for similar items in EconPapers)
Date: 2019-02-13
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (1)

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Journal Article: Sectoral shocks and home substitution (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:qld:uq2004:602

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