Income differences and input-output structure

Fadinger, Harald ; Ghiglino, Christian ; Teteryatnikova, Mariya

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URL:	https://ub-madoc.bib.uni-mannheim.de/39627
URN:	urn:nbn:de:bsz:180-madoc-396276
Dokumenttyp:	Arbeitspapier
Erscheinungsjahr:	2015
Titel einer Zeitschrift oder einer Reihe:	Working Paper Series
Band/Volume:	15-11
Ort der Veröffentlichung:	Mannheim
Sprache der Veröffentlichung:	Englisch
Einrichtung:	Fakultät für Rechtswissenschaft und Volkswirtschaftslehre > Internat. Handel, Makroökonomik, Entwicklungsökonomik (Fadinger 2014-)
MADOC-Schriftenreihe:	Department of Economics > Working Paper Series
Fachgebiet:	330 Wirtschaft
Fachklassifikation:	JEL: O11 , O14 , O47 , C67 , D85,
Freie Schlagwörter (Englisch):	input-output structure , networks , productivity , cross-country income differences
Abstract:	We consider a multi-sector general equilibrium model with IO linkages, sector-specific productivities and tax rates. Using tools from network theory, we investigate how the IO structure interacts with productivities and taxes in the determination of aggregate income. We show that aggregate income is a simple function of the first and second moments of the distribution of the IO multipliers, sectoral productivities and sectoral tax rates. We then estimate the parameters of the model to fit their joint empirical distribution. Poor countries have more extreme distributions of IO multipliers than rich economies: there are a few high-multiplier sectors, while most sectors have very low multipliers; by contrast, rich countries have more sectors with intermediate multipliers. Moreover, the correlations of these with productivities and tax rates are positive in poor countries, while being negative in rich ones. The estimated model predicts cross-country income differences extremely well, also out-of-sample. Finally, we perform a number of counterfactuals and compute optimal tax rates.