Direct and network effects of idiosyncratic TFP shocks

Kristina Barauskaite (Griskeviciene) and Anh Nguyen

Empirical Economics, 2021, vol. 60, issue 6, No 5, 2765-2793

Abstract: Abstract This study investigates the direct and intersectoral network effects of idiosyncratic TFP shocks on sectors’ growth in the context of US manufacturing industries. To deal with the potential endogeneity of TFP, we propose a novel set of instruments for contemporaneous regressors. These instruments are technology shocks identified via sign restriction from sectoral SVAR models. Using US input–output tables and industry-level data, we quantify direct and network-based effects of the shocks. Our results show that a positive idiosyncratic technology shock induces large positive direct and network effects on sectoral growth. In terms of the network effect, we find that the shocks propagate mostly downstream the network.

Keywords: Input–output linkages; Network; Instrumental variables; Idiosyncratic TFP shocks; Sectoral growth; US manufacturing industry (search for similar items in EconPapers)
JEL-codes: C36 C67 D24 E32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (4)

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Working Paper: Direct and Network Effects of Idiosyncratic TFP Shocks (2019)
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DOI: 10.1007/s00181-020-02009-9

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