How production networks amplify economic growth

James McNerney, Charles Savoie, Francesco Caravelli, Vasco Carvalho and J. Farmer
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James McNerney: a Center for International Development, Kennedy School of Government, Harvard University, Cambridge, MA 02139;; b Institute for Data, Systems, and Society, MIT, Cambridge, MA 02142;; c Complexity Science Hub Vienna, A-1080 Vienna, Austria;
Charles Savoie: d Institute for New Economic Thinking at the Oxford Martin School, University of Oxford, Oxford OX1 3UQ, United Kingdom;
Francesco Caravelli: e Theoretical Division (T-4 and Center for Nonlinear Studies), Los Alamos National Laboratory, Los Alamos, NM 87545;

Proceedings of the National Academy of Sciences, 2021, vol. 119, issue 1, e2106031118

Abstract: Technological improvement is the most important cause of long-term economic growth. We study the effects of technology improvement in the setting of a production network, in which each producer buys input goods and converts them to other goods, selling the product to households or other producers. We show how this network amplifies the effects of technological improvements as they propagate along chains of production. Longer production chains for an industry bias it toward faster price reduction, and longer production chains for a country bias it toward faster growth. These predictions are in good agreement with data and improve with the passage of time, demonstrating a key influence of production chains in price change and output growth over the long term.

Keywords: production networks; technology change; economic growth; price evolution. (search for similar items in EconPapers)
Date: 2021
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Related works:
Working Paper: How production networks amplify economic growth (2021)
Working Paper: How production networks amplify economic growth (2021)
Working Paper: How production networks amplify economic growth (2021)
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