Input-output linkages and sectoral productivity levels determine the total output of an economy. We ask the question: which features of the interlinkages/TFP are favourable to GDP, abstracting from country specificities. We use a tractable multi-sector general equilibrium model and obtain GDP as function of the IO matrix and the TFP levels.OWVER, We adopt a statistical approach in which IO matrices are realisations of a common random process and estimate the distribution of this process as a function of GDP. We uncover important differences in IO structure and its interaction with TFP across countries: highly connected sectors are more productive than the typical sector, a feature particularly strong in poor countries.

In the second part of the analysis we endogeneise the evolution of the IO/TFP matrix by considering technological innovation. We model innovation by a guided random process in which technological recipes from different sectors are combined. Using formal analysis and patent data we show that the process is compatible with the observed traits of IO matrices.


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Research Programmes