Online Appendix to "How Important Are Sectoral Shocks?"

In this section, I will apply plant-level input price variation and materials usage to provide an alternate set of estimates of εQ. To do so, I pursue the following two-part strategy. For each industry, I estimate how easily individual plants substitute across their factors of production, by relating plants’ materials purchases to their materials prices. Then, I apply the methods developed in Oberfield and Raval (2015), which allow me to combine information on a) the plant-level elasticity of substitution, b) the dispersion of materials cost shares, and c) the elasticity of plant scale to marginal costs so that I can ascertain the corroborating estimates of εQ. To preview the main results of this section, the elasticity of substitution for the plantlevel production function is approximately 0.65. Because within-industry variation in materials expenditure shares is small for each of the ten industries, the industry level production function’s elasticity of substitution is only somewhat higher, 0.75. Moreover, across the industries in the sample, the industry-level elasticities of substitution are similar to one another.