Research

(Abstract). This paper makes two novel contributions to the understanding of production networks and their role on comovement. First, it introduces a theoretical framework that distinguishes between demand- and supply-driven network distances, measuring economic distance between sectors based on shared upstream sellers or downstream buyers. These horizontal complementarities determine how sector-specific shocks transmit horizontally across the network, paralleling and rebalancing the standard vertical mechanism of sectoral supply chains. Comovement thus hinges on the geometry of network distances: nearby sectors tend to move in opposite directions due to common trade relations, whereas distant sectors comove as vertical propagation prevails. Second, using sector-level U.S. employment data, the paper provides empirical evidence that positive employment shocks in closely demand- or supply-related sectors are counteracted, while greater network distances generate employment comovement. Together, these two contributions reveal that the horizontal geometry of a production network plays a critical role in understanding how sectoral interactions propagate micro-originated shocks in an Input-Output economy.

JEL: C67, D57, E32, F16, L14

KEYWORDS: Input-Output economy, production networks, network distance, horizontal transmission, sectoral comovement, tools for policy design

(Abstract). Industry dimension is increasingly dominant to investigate the upward trend of inequality. This paper examines the key drivers of US wage inequality through a general equilibrium model, emphasising the role of heterogeneous capital-labour substitution elasticities across industries in shaping wage dispersion. Key is the distinction of a quantity effect (changes in the composition of capital and labour inputs) and a structural effect (reflecting technological transformations in inputs substitutability) from Skill-Biased Technological Change (SBTC). Findings suggest that industry-level transformations on the labour side − differentials in job tasks substitutability and workforce composition − constitute the principal drivers of real wage inequality, overshadowing the contribution of capital-side adjustments. A structural estimation of the model reveals that trend-asymmetries in the elasticities of substitution between ICT capital, routine and non-routine workers account for 94% of observed wage variance, while stronger sorting and segregation effects further exacerbate such dispersion. Upon neutralising structural differences between industries, Skill-Biased Technological Change reckons merely 6–15% of the observed wage inequality.

JEL: E24, J31, J82, L16, O33

KEYWORDS: wage inequality, structural transformations, industry, tasks, labour force composition, labour share