A dynamic production network approach to model resource productivity shocks from policy interventions in the UK

Aicha Kharazi (), Peter Hopkinson, Markus Zils and Tomoko Kobayashi
Additional contact information
Aicha Kharazi: University of Warwick
Peter Hopkinson: University of Exeter Business School
Markus Zils: University of Exeter Business School
Tomoko Kobayashi: Returnity Partners

International Economics and Economic Policy, 2025, vol. 22, issue 4, No 14, 42 pages

Abstract: Abstract Widespread interest in circular economy policies to drive resource productivity with positive environmental and social spillovers has led to a proliferation of small-scale studies and case examples. To date, there remain relatively few macroeconomic approaches to estimate aggregate resource productivity impacts mostly reliant on static input–output (I/O) general equilibrium approaches rather than discrete sectoral value chain analysis. This paper presents the first steps in a novel approach to measuring the potential effects of transitioning to a circular economy in the UK by modelling the propagation of resource productivity shocks in a large-scale dynamic production network model. In contrast to static approaches, our framework assumes rich dynamic adjustment through input–output linkages. Using production network I/O data from the UK, we examine the interconnectedness of the UK economy and how this impacts the potential propagation of total factor productivity shocks. We find that highly connected sectors benefit more from an increase in productivity. Furthermore, we show that a subsidy program scenario based on potential outcomes of circular economy interventions, such as reduced material costs initially in the manufacturing sector, amplifies the effects of a positive total factor productivity shock, leading to large output gains. These gains are even larger when the subsidy support is allocated to influential sectors, and slightly less when extended to large sectors. We also show that this program generates positive spillover effects on non-targeted sectors.

Keywords: Production network; Productivity; Industrial policy; Dynamic input–output model (search for similar items in EconPapers)
JEL-codes: C67 D57 E23 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10368-025-00690-8 Abstract (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:iecepo:v:22:y:2025:i:4:d:10.1007_s10368-025-00690-8

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10368/PS2

DOI: 10.1007/s10368-025-00690-8

Access Statistics for this article

International Economics and Economic Policy is currently edited by Paul J.J. Welfens, Holger C. Wolf, Christian Pierdzioch and Christian Richter

More articles in International Economics and Economic Policy from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().