Input-output linkages in growth and development
Document TypePhD thesis
Access StatusOpen Access
© 2019 Hang Hu
Do input-output linkages impact growth and development? This dissertation provides three main chapters studying the role of input-output linkages in structural change and productivity measurement. I find that (i) input-output linkages offer a new mechanism to account for structural change, which therefore complements the structural change literature; (ii) input-output linkages affect productivity measurement, particularly impact sector-level productivity measurement. Chapter 2 presents new evidence and mechanism of input-output linkages in structural change. Sectors with a larger growth of supply (forward) linkages of intermediate inputs absorb more labor to satisfy the rising demand for inputs sourcing from the downstream sectors. Sectors with a larger growth of demand (backward) linkages of intermediate inputs displace more labor, due to the increasing reliance on inputs sourcing rather than in-house production. Manufacturing sector increasingly sources services inputs, such as business services and management services, prompting a rise of services and a decline of manufacturing. Motivated by the evidence and mechanism in Chapter 2, Chapter 3 develops a general equilibrium model and quantifies the new mechanism of input-output linkages in structural change. The model features endogenous input-output linkages, nonhomothetic constant-elasticity-of-substitution (CES) preferences and technology, and heterogeneous firms. The model is structurally calibrated to the World Input-Output Database which contains 35 major economies through 1995-2007. I find that (i) the supply-linkages effects are at least comparable to other mechanisms in the literature, such as the price effects due to the sector-biased technological change; (ii) the demand-linkages effects are less critical due to the stable use of intermediate inputs across years; (iii) about half of the structural change attributes to the rising comparative advantage for supplying intermediate inputs by the services sector relative to by the manufacturing sector. Chapter 4 studies the role of input-output linkages in productivity measurement. I construct two hypothetical economies in the model. In the input-output economy, sectors produce gross output by using both intermediate and primary inputs. In the value added economy, sectors produce value added by using only primary inputs. I compare the two economies. I find that (i) aggregate productivity is theoretically equivalent; (ii) sectoral productivity measurement are different for all sectors and countries; (iii) without taking input-output linkages into account, previous measures of productivity are biased.
Keywordsinput-output linkages; structural change; domestic outsourcing; Ricardian intersector trade; nonhomothetic CES; heterogeneous firms; productivity measurement
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- Economics - Theses