Input Substitutability and Cross-Country Variation in Sectoral Linkages
Using panel data on input-output intensities and expenditure prices from 28 countries, this paper finds the elasticity of substitution across sectoral inputs to be less than one in each of the three broad sectors of the economy. Intermediates are m...
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Online Access: | http://documents.worldbank.org/curated/en/374631552312398249/Input-Substitutability-and-Cross-Country-Variation-in-Sectoral-Linkages http://hdl.handle.net/10986/31396 |
| Summary: | Using panel data on input-output
intensities and expenditure prices from 28 countries, this
paper finds the elasticity of substitution across sectoral
inputs to be less than one in each of the three broad
sectors of the economy. Intermediates are most complementary
in the production of services while it is easiest to
substitute across intermediates in the production of
agricultural goods. Differences in relative prices alone
account for a non-trivial fraction of the cross-country
variation in sectoral linkages. Abstracting from the price
channel that allows for substitution across inputs in
response to changes in relative prices delivers biased
aggregate implications of changes in productivity and distortions. |
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