A Theory of Input–Output Architecture

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Abstract

Individual producers exhibit enormous heterogeneity in many dimensions. This paper develops a theory in which the network structure of production—who buys inputs from whom—forms endogenously. Entrepreneurs produce using labor and exactly one intermediate input; the key decision is which other entrepreneur's good to use as an input. Their choices collectively determine the economy's equilibrium input–output structure, generating large differences in size and shaping both individual and aggregate productivity. When the elasticity of output to intermediate inputs in production is high, star suppliers emerge endogenously. This raises aggregate productivity as, in equilibrium, more supply chains are routed through higher-productivity techniques.

Original languageEnglish (US)
Pages (from-to)559-589
Number of pages31
JournalEconometrica
Volume86
Issue number2
DOIs
StatePublished - Mar 2018

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Networks
  • economic growth
  • ideas
  • input–output structure
  • productivity
  • size distribution
  • supply chains

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