Income Differences, Productivity, and Input-Output Networks

We study the importance of input-output (IO) linkages and sectoral productivity (TFP) in determining cross-country income differences. find that while highly connected sectors are more productive than typical sector poor countries, opposite is true rich ones. To assess quantitative role TFP differences differences, we decompose variation using a multisector general equilibrium model. IO substantially amplify fundamental variation, but this amplification significantly weaker one suggested by simple model with an aggregate intermediate good. (JEL D57, E16, E23, O11, O47)