Linkages and Economic Development

Dominick Bartelme () and Yuriy Gorodnichenko

No 21251, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Specialization is a powerful source of productivity gains, but how production networks at the industry level are related to aggregate productivity in the data is an open question. We construct a database of input-output tables covering a broad spectrum of countries and times, develop a theoretical framework to derive an econometric specification, and document a strong and robust relationship between the strength of industry linkages and aggregate productivity. We then calibrate a multisector neoclassical model and use alternative identification assumptions to extract an industry-level measure of distortions in intermediate input choices. We compute the aggregate losses from these distortions for each country in our sample and find that they are quantitatively consistent with the relationship between industry linkages and aggregate productivity in the data. Our estimates imply that the TFP gains from eliminating these distortions are modest but significant, averaging roughly 10% for middle and low income countries.

JEL-codes: C67 O11 O47 (search for similar items in EconPapers)
Date: 2015-06
New Economics Papers: this item is included in nep-eff and nep-gro
Note: EFG ITI ME PR
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Citations: View citations in EconPapers (76)

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