STEG Working Paper Series Research Theme 1: Firms, Frictions and Spillovers, and Industrial Policy, Research Theme 4: Trade and Spatial Frictions

Industry Linkages from Joint Production

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I develop a theory of joint production to quantify aggregate economies of scope. In US manufacturing data, increased export demand in one industry raises a firm’s sales in its other industries that share knowledge inputs like R&D and software. I estimate that knowledge inputs contribute to economies of scope through their scalability and partial non-rivalry within the firm. On average a 10 percent increase in output in one industry lowers prices in other industries by 0.4 percent. Such economies of scope manifest disproportionately among knowledge-proximate industries and imply large spillover impacts of recent US-China trade policy on producer prices.

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