Research

(Abstract). Modern economies are organized as dense production networks, yet sectoral comovement is typically understood only through vertical Input-Output linkages and cascade effects. This paper argues that this view is incomplete. I show that comovement fundamentally depends on horizontal complementarities: the extent to which sectors share common upstream suppliers or downstream buyers. These similar demand and supply network structures induce simultaneous responses to idiosyncratic shocks, shaping the sign of comovement. I develop a theoretical framework that disentangles vertical from horizontal transmission, offering a unified view of comovement rooted in the horizontal geometry of common economic interactions rather than their trade intensity. Unlike vertical propagation, horizontal transmission does not rely on cascading amplification or dominant sectors for aggregate fluctuations, but generates systematic comovement that prevents shocks from averaging out. Using U.S. Input-Output data, I show that sectoral employment responses vary systematically with demand and supply distances, with nearby sectors exhibiting dampened or opposing responses and distant sectors comoving positively.

JEL: C67, D57, E32, J21

KEYWORDS: Input-Output economy, production networks, network distance, horizontal transmission, sectoral comovement, aggregate fluctuations

(Abstract). Industry dimension is increasingly dominant to investigate the upward trend of inequality. This paper examines the key drivers of US wage inequality, 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, quantity adjustments 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