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Distortions and the Structure of the World Economy

Author

Listed:
  • Lorenzo Caliendo
  • Fernando Parro
  • Aleh Tsyvinski

Abstract

We model the world economy as one system of endogenous input-output relationships subject to frictions and study how the world's input-output structure and world's GDP change due to changes in frictions. We derive a sufficient statistic to identify frictions from the observed world input-output matrix, which we fully match for the year 2011. We show how changes in internal frictions impact the whole structure of the world's economy and that they have a much larger effect on world's GDP than external frictions. We also use our approach to study the role of internal frictions during the Great Recession of 2007–2009.

Suggested Citation

  • Lorenzo Caliendo & Fernando Parro & Aleh Tsyvinski, 2022. "Distortions and the Structure of the World Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(4), pages 274-308, October.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:4:p:274-308
    DOI: 10.1257/mac.20190410
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    Citations

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    Cited by:

    1. Taylor Jaworski & Carl Kitchens & Sergey Nigai, 2023. "Highways And Globalization," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(4), pages 1615-1648, November.
    2. Francisco J. Buera & Nicholas Trachter, 2024. "Sectoral Development Multipliers," NBER Working Papers 32230, National Bureau of Economic Research, Inc.
    3. Sophie Osotimehin & Latchezar Popov, 2023. "Misallocation and Intersectoral linkages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 177-198, December.
    4. Sophie Osotimehin & Latchezar Popov, 2023. "Misallocation and Intersectoral linkages," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 177-198, December.
    5. Siying Ding & Ahmad Lashkaripour & Volodymyr Lugovskyy, 2024. "A Global Perspective on the Incidence of Monopoly Distortions," CESifo Working Paper Series 11211, CESifo.

    More about this item

    JEL classification:

    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • E16 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Social Accounting Matrix
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

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