How production networks amplify economic growth.
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Publication Date
2022-01-04Journal Title
Proc Natl Acad Sci U S A
ISSN
0027-8424
Publisher
Proceedings of the National Academy of Sciences
Type
Article
This Version
AM
Metadata
Show full item recordCitation
McNerney, J., Savoie, C., Caravelli, F., Carvalho, V. M., & Farmer, J. D. (2022). How production networks amplify economic growth.. Proc Natl Acad Sci U S A https://doi.org/10.1073/pnas.2106031118
Abstract
Technological improvement is the most important cause of long-term economic growth. In standard growth models, technology is treated in the aggregate, but an economy can also be viewed as a network in which producers buy goods, convert them to new goods, and sell the production to households or other producers. We develop predictions for how this network amplifies the effects of technological improvements as they propagate along chains of production, showing that longer production chains for an industry bias it toward faster price reduction and that longer production chains for a country bias it toward faster growth. These predictions are in good agreement with data from the World Input Output Database and improve with the passage of time. The results show that production chains play a major role in shaping the long-term evolution of prices, output growth, and structural change.
Sponsorship
ERC Consolidator Grant; Leverhulme Prize
Funder references
Leverhulme Trust (PLP-2016-209)
Alan Turing Institute (Turing-HSBC Programme)
European Commission Horizon 2020 (H2020) ERC (101001221)
Identifiers
External DOI: https://doi.org/10.1073/pnas.2106031118
This record's URL: https://www.repository.cam.ac.uk/handle/1810/331324
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