Product-level value chains from firm data: mapping trophic levels into economic growth

TL;DR

This paper reconstructs a detailed product-level input-output network from Italian firm data, revealing nuanced trophic structures that predict economic growth and differ from coarse sector analyses.

Contribution

It introduces a novel method to map trophic levels at the product level using firm data, enhancing understanding of global value chains and economic growth predictors.

Findings

Product-level trophic structure is significant and nuanced.

Sectors like weapons and vehicles show increased downstreamness.

Metrics derived are predictive of country-level economic growth.

Abstract

We reconstruct a product-level input-output network based on firm-level import-export data of Italian firms. We show that the network has a statistically significant, yet nuanced trophic structure, which is evident at the product level but is lost when the classification is coarse-grained. This detailed value chain allows us to characterize the trophic distance between inputs and outputs of single firms, and to derive a coherent picture at the sector level, finding that sectors such as weapons and vehicles are the ones with the largest increase in downstreamness between their inputs and their outputs. Our measure of downstreamness at the product level can be used to derive country-level indicators that characterize industrial strategies and capabilities and act as predictors of economic growth. With respect to the standard input/output analysis, we show that the fine-grained structure is qualitatively different from what can be observed using sector-level data. We finally prove that, even if we leverage exclusively data from Italian firms, the metrics that we derive are predictive at the country level and capture a significant description of the input-output relations of global value chains.