Equivalence between input-output and value-added economies

Leal-Ordoñez Julio C.
Authors registered in the RePEc Author Service: Julio César Leal Ordóñez

No 2017-13, Working Papers from Banco de México

Abstract: I show that, under standard assumptions, input-output (or network) economies are equivalent to value-added ones. Using a generalized version of the model in Acemoglu et al. (Econometrica, 2012), I show that the degree of influence of a given sector is equal to its value added share. This occurs because --by using the input-output network-- the output of a given sector indirectly contributes to the production of the final consumption of the rest of the sectors, which constitutes the source of its value. Thus, value-added economies deliver the same aggregate response to sectoral shocks than input-output ones. Despite this equivalence, the Leontief multiplier, which applies to sales and gross output, is intact.

Keywords: Input-output; Degree of influence; Value added; Network economies; Sectoral shocks (search for similar items in EconPapers)
JEL-codes: C67 E10 E16 (search for similar items in EconPapers)
Date: 2017-07
New Economics Papers: this item is included in nep-mac
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