Technical change and macroeconomic resilience to sectoral shocks

Florentine Schwark and Andreas Tryphonides

Economics Letters, 2025, vol. 246, issue C

Abstract: The technological advances experienced by many economies during the last decades have fundamentally reshaped production functions. How do such changes affect the transmission of sectoral supply-side shocks to the gross domestic product (Domar weights) and hence macroeconomic resilience? We show that Domar weights decrease with the elasticity of substitution if value added is relatively abundant compared to intermediate inputs in production. Empirical evidence from European sectors suggests that the elasticity of substitution has a stronger effect on resilience today than it had some decades ago, with a clear negative contribution to Germany’s resilience post 2010.

Keywords: Elasticity of substitution; Domar weights; Resilience; Production Networks (search for similar items in EconPapers)
JEL-codes: E1 E23 E25 O33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:246:y:2025:i:c:s0165176524005615

DOI: 10.1016/j.econlet.2024.112077

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