A note on optimal sectoral policies in production networks

Miranda-Pinto, Jorge

doi:10.1016/j.econlet.2018.08.036

Cited by 5 publications

(4 citation statements)

References 16 publications

(22 reference statements)

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“…However, given that our main purpose is to investigate the Great Recession, we assume that sectoral constraints are binding; we solve the model for a given set of sectoral wedges. Given the wedges, we can obtain solutions for sectoral prices and aggregate GDP (see Miranda-Pinto (2018a) online Appendix for more details).…”

Section: The Role Of Sectoral Heterogeneity In the Great Recessionmentioning

confidence: 99%

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Flexibility and Frictions in Multisector Models

Miranda-Pinto

Youngs

2022

American Economic Journal: Macroeconomics

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We show that during the Great Recession, more-flexible sectors paid lower sectoral bond spreads. We rationalize this fact with a model with input-output linkages, heterogeneous elasticities, and binding working capital constraints in the use of intermediates. We show that the difference in flexibility between upstream and downstream sectors is key for determining the role of input-output linkages in amplifying or mitigating distortions. Calibrating the model to the US economy, we find that our sectoral elasticity estimates amplify distortions by a factor of 1.7 compared to the Cobb-Douglas case, and generate an input-output multiplier 1.2 times the homogeneous elasticity case. (JEL E23, E32, E43, E44, H56, L16)

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Section: The Role Of Sectoral Heterogeneity In the Great Recessionmentioning

confidence: 99%

“…Sectoral distortions in the use of inputs and sectoral linkages imply the existence of significant pecuniary externalities due the presence of prices in the collateral constraints. Miranda-Pinto (2018a) and Liu (2017) study the policy implications of related models. 4…”

Section: Introductionmentioning

confidence: 99%

Flexibility and Frictions in Multisector Models

Miranda-Pinto

Youngs

2022

American Economic Journal: Macroeconomics

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“…This paper, therefore, falls partially within the literature on equilibrium multi-sector models first developed by Long and Plosser (1983), and later Horvath (1998Horvath ( , 2000, and Dupor (1999). Since then, a large body of work including Gabaix (2011), Foerster et al (2011), Acemoglu et al (2012), di Giovanni et al (2014, Atalay (2017), Baqaee and Farhi (2017b), Miranda-Pinto (2018), and others have worked out important features of those models for generating aggregate fluctuations from idiosyncratic shocks. 3 In contrast to this literature, the focus herein centers on the implications of production linkages for secular dynamics and the determination of both sectoral and aggregate trend growth rates.…”

Section: Introductionmentioning

confidence: 97%

Aggregate Implications of Changing Sectoral Trends

Foerster¹,

Hornstein²,

Sarte³

et al. 2019

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We find disparate trend variation in TFP and labor growth across major U.S. production sectors over the post-WWII period. We embed this sectoral trend variation into a dynamic multi-sector framework where materials and capital used in each sector are produced by other sectors. We show that capital induces important dynamic network effects from production linkages that amplify the impact of shocks to sectoral inputs on aggregate growth, even absent nonlinearities in production. In some sectors, changes in TFP and labor growth lead to changes in GDP growth that may be as large as three times these sectors' shares in the economy. We estimate that trend GDP growth has declined by more than 2 percentage points since 1950, and that growth contractions specific to Construction, Nondurable Goods, and Professional and Business and Services make up roughly sixty percent of the estimated trend decrease in GDP growth.

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Section: Introductionmentioning

confidence: 97%

Aggregate Implications of Changing Sectoral Trends

Foerster

Hornstein

Sarte

et al. 2022

Journal of Political Economy

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We find disparate trend variation in TFP and labor growth across major U.S. production sectors over the post-WWII period. When aggregated, these sector-specific trends imply secular declines in the growth rate of aggregate labor and TFP. We embed this sectoral trend variation into a dynamic multi-sector framework in which materials and capital used in each sector are produced by other sectors. The presence of capital induces important network effects from production linkages that amplify the consequences of changing sectoral trends on GDP growth. Thus, in some sectors, changes in TFP and labor growth lead to changes in GDP growth that may be as large as three times these sectors' share in the economy. We find that trend GDP growth has declined by more than 2 percentage points since 1950, and that this decline has been primarily shaped by sector-specific rather than aggregate factors. Sustained contractions in growth specific to Construction, Nondurable Goods, and Professional and Business and Services make up close to sixty percent of the estimated trend decrease in GDP growth. In addition, the slow process of capital accumulation means that structural changes have endogenously persistent effects. We estimate that trend GDP growth will continue to decline for the next 10 years absent persistent increases in TFP and labor growth.

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A note on optimal sectoral policies in production networks

Cited by 5 publications

References 16 publications

Flexibility and Frictions in Multisector Models

Flexibility and Frictions in Multisector Models

Aggregate Implications of Changing Sectoral Trends

Aggregate Implications of Changing Sectoral Trends

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