Economists are just starting to understand how observed input-output linkages and productivity differences are connected. This column investigates how differences in the distribution of sectoral input-output multipliers interact with sectoral productivities to determine cross-country differences in aggregate income. It finds that the impact of the linkages on productivity are substantial, which in turn has significant implications for policy.
Harald Fadinger, Christian Ghiglino, Mariya Teteryatnikova, 24 December 2016
Hylke Vandenbussche, Christian Viegelahn, 02 October 2016
In a world where production is increasingly fragmented across borders, a large number of firms import their raw material inputs from abroad. This column investigates how firms’ input and output choices are affected by import tariffs on inputs that domestic firms use in production. Based on firm-product level data for India, it finds that firms decrease their use of inputs subject to the tariff, relative to other inputs. Firms also decrease their sales of outputs made of these inputs, relative to other outputs.
Joaquin Blaum, Claire Lelarge, Michael Peters, 05 December 2015
As intermediate inputs account for two thirds of world trade, understanding the implications of input trade is an important task in international economics. This column argues that spending patterns on foreign inputs at the firm-level are key to quantifying the welfare consequence of input trade, as trade in intermediates allows firms to reduce their costs of production thereby benefitting the aggregate economy. It estimates that a 20% drop in the share of imported inputs in France would lead to a 7% increase in the consumer price index.