Sectoral Development Multipliers

Francisco Buera and Nicholas Trachter

No 24-02, Working Paper from Federal Reserve Bank of Richmond

Abstract: How should industrial policies be directed to reduce distortions and foster economic development? We study this question in a multi-sector model with technology adoption, where the production of goods and modern technologies features rich network structures. We provide simple formulas for the sectoral policy multipliers, and provide insights regarding the power of alternative policy instruments. We devise a simple procedure to estimate the model parameters and the distribution of technologies across sectors, which we apply to Indian data. We find that technology adoption greatly amplifies the multipliers' magnitudes, and it changes the ranking of priority sectors for industrial policy. Further, we find that adoption subsidies are the most cost-effective instrument for promoting economic development.

Keywords: Sectoral policy; technology; economic development (search for similar items in EconPapers)
JEL-codes: L52 O33 (search for similar items in EconPapers)
Pages: 55
Date: 2024-03-13
New Economics Papers: this item is included in nep-tid
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Working Paper: Sectoral Development Multipliers (2024)
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