Distortions and the Structure of the World Economy

Lorenzo Caliendo, Fernando Parro and Aleh Tsyvinski

American Economic Journal: Macroeconomics, 2022, vol. 14, issue 4, 274-308

Abstract: We model the world economy as one system of endogenous input-output relationships subject to frictions and study how the world's input-output structure and world's GDP change due to changes in frictions. We derive a sufficient statistic to identify frictions from the observed world input-output matrix, which we fully match for the year 2011. We show how changes in internal frictions impact the whole structure of the world's economy and that they have a much larger effect on world's GDP than external frictions. We also use our approach to study the role of internal frictions during the Great Recession of 2007–2009.

JEL-codes: D57 E16 E23 E32 F41 G01 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (5)

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DOI: 10.1257/mac.20190410

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