Year: 2021
Type: article
Abstract: The COVID-19 crisis is a seemingly all-encompassing shock to supply and demand. These negative shocks affected industries differently: some switched to remote work, maintaining employment and production, while others reduced capacity and shed workers. We consider a stripped-down version of the model in Baqaee and Farhi (2020). The model allows for an arbitrary input-output network, complementarities, incomplete markets, downward wage rigidity, and a zero lower bound. Nevertheless, the model has a stark property: factor income shares at the initial equilibrium are global sufficient statistics for the production network, clarifying assumptions that must be broken if the network is to matter.
Source: AEA Papers and Proceedings
Authors: David Baqaee, Emmanuel Farhi
Institution: University of California, Los Angeles
Language: English
Topic: Economic Theory and Policy
Domain: Social Sciences
Open Access status: bronze
Funder: National Science Foundation
OpenAlex ID: W3142983136