Year: 2007
Type: preprint
Abstract: This paper analyzes and models the ‡ow of intermediate inputs across sectors by adopting a network perspective on sectoral interactions.I apply these tools to show how ‡uctuations in aggregate economic activity can be obtained from independent shocks to individual sectors.First, by interpreting data in detailed input-use matrices through this lens, I characterize the structure of input trade in the U.S.. On the demand side, a typical sector relies on a small number of key inputs and sectors are homogeneous in this respect.However, in their role as input-suppliers sectors do di¤er: many specialized input suppliers coexist alongside general purpose sectors that function as hubs to the economy.The paper then constructs a network model of input-use matrices that can reproduce these connectivity features in the data.In a standard multisector setup, I then use this model of input-use matrices to provide analytical expressions linking the variability in aggregates to the network structure of input trade.I show that the presence of sectoral hubs -by coupling production decisions across the economy -leads to ‡uctuations in aggregates.Furthermore, I show that this network approach provides a common framework for hitherto opposing arguments on how fast the volatility of aggregates decays with the number of sectoral technologies.
Author: Vasco M. Carvalho
Institution: University of Chicago
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
Funder: University of Chicago
OpenAlex ID: W1500415163