 Business Networks, Production Chains, and Productivity: A Theory of Input-Output ArchitectureNo 120, 2013 Meeting Papers from Society for Economic Dynamics Abstract: This paper develops a theory of the formation and evolution of chains of production. Entrepreneurs search for production techniques that use alternative sets of inputs, which are in turn produced by other entrepreneurs. The value of a technique depends both on its inherent productivity and on the cost of associated inputs; when producing, each entrepreneur selects the technique that delivers the best combination. These choices collectively determine the economy's equilibrium input-output structure. As new techniques are discovered, entrepreneurs substitute across suppliers in response to changing input prices. Despite the network structure, the model is analytically tractable, allowing for sharp characterizations of aggregate productivity and various firm-level characteristics. Aggregate productivity depends on how frequently the lower-cost firms are selected as suppliers. When the share of intermediate goods in production is high, star suppliers emerge endogenously, increasing the concentration of sales of intermediate goods and raising aggregate output. Date: 2013 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:120 Access Statistics for this paper More papers in 2013 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC. |
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