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URL:
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https://ub-madoc.bib.uni-mannheim.de/39627
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URN:
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urn:nbn:de:bsz:180-madoc-396276
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Document Type:
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Working paper
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Year of publication:
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2015
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The title of a journal, publication series:
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Working Paper Series
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Volume:
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15-11
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Place of publication:
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Mannheim
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Publication language:
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English
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Institution:
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School of Law and Economics > VWL, Internat. Handel, Makroökonomik, Entwicklungsökonomik (Juniorprofessur) (Fadinger 2014-)
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MADOC publication series:
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Department of Economics > Working Paper Series
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Subject:
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330 Economics
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Classification:
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JEL:
O11 , O14 , O47 , C67 , D85,
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Keywords (English):
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input-output structure , networks , productivity , cross-country income differences
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Abstract:
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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.
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