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A Theory of Input-Output Architecture

Author(s): Oberfield, Ezra D.

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Abstract: Individual producers exhibit enormous heterogeneity in many dimensions. This paper develops a theory in which the network structure of production—who buys inputs from whom—forms endogenously. Entrepreneurs produce using labor and exactly one intermediate input; the key decision is which other entrepreneur's good to use as an input. Their choices collectively determine the economy's equilibrium input–output structure, generating large differences in size and shaping both individual and aggregate productivity. When the elasticity of output to intermediate inputs in production is high, star suppliers emerge endogenously. This raises aggregate productivity as, in equilibrium, more supply chains are routed through higher‐productivity techniques.
Publication Date: Mar-2018
Citation: Oberfield, Ezra. (2018). A Theory of Input-Output Architecture. ECONOMETRICA, 86 (2), 559 - 589. doi:10.3982/ECTA10731
DOI: doi:10.3982/ECTA10731
ISSN: 0012-9682
EISSN: 1468-0262
Pages: 559 - 589
Type of Material: Journal Article
Journal/Proceeding Title: ECONOMETRICA
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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