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Income Differences and Input-Output Structure

Harald Fadinger, Christian Ghiglino () and Mariya Teteryatnikova ()
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Mariya Teteryatnikova: http://www.univie.ac.at/Wirtschaftswissenschaften

Vienna Economics Papers from University of Vienna, Department of Economics

Abstract: We consider a multi-sector general equilibrium model with IO linkages, sector-speci c productivities and tax rates. Using tools from network theory, we investigate how the IO structure interacts with productivities and taxes in the determination of aggregate income. We show that aggregate income is a simple function of the rst and second moments of the distribution of the IO multipliers, sectoral productivities and sectoral tax rates. We then estimate the parameters of the model to t their joint empirical distribution. Poor countries have more extreme distributions of IO multipliers than rich economies: there are a few high-multiplier sectors, while most sectors have very low multipliers; by contrast, rich countries have more sectors with intermediate multipliers. Moreover, the correlations of these with productivities and tax rates are positive in poor countries, while being negative in rich ones. The estimated model predicts cross-country income di erences extremely well, also out-of-sample. Finally, we perform a number of counterfactuals and compute optimal tax rates.

JEL-codes: O11 O14 O47 C67 D85 (search for similar items in EconPapers)
Date: 2015-09
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http://homepage.univie.ac.at/Papers.Econ/RePEc/vie/viennp/vie1510.pdf (application/pdf)

Related works:
Working Paper: Income Differences and Input-Output Structure (2016) Downloads
Working Paper: Income differences and input-output structure (2015) Downloads
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