Short and Long Run Externalities

27 Pages Posted: 24 Jul 2007

See all articles by Eric J. Bartelsman

Eric J. Bartelsman

Vrije Universiteit Amsterdam; Tinbergen Institute; IZA Institute of Labor Economics

Ricardo J. Caballero

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Richard K. Lyons

University of California, Berkeley; National Bureau of Economic Research (NBER)

Date Written: August 1991

Abstract

In this paper we build upon previous work on external economies in manufacturing [Caballero and Lyons (1989, 1990)] by providing new evidence helpful for discriminating between different types of externalities. We investigate four-digit level input-output relationships and find that, over shorter horizons, the linkage between an industry and its customers is the most important factor in the transmission of externalities. This suggests that transactions externalities accruing primarily to the seller, and/or activity-driven demand externalities are significant for explaining the short-run behavior of measured total factor productivity. Over longer horizons. on the other hand, it is the activity level of suppliers that is more important. This suggests that external effects are also operating through intermediate goods linkages.

Suggested Citation

Bartelsman, Eric J. and Caballero, Ricardo J. and Lyons, Richard K., Short and Long Run Externalities (August 1991). NBER Working Paper No. w3810, Available at SSRN: https://ssrn.com/abstract=473958

Eric J. Bartelsman (Contact Author)

Vrije Universiteit Amsterdam ( email )

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Ricardo J. Caballero

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Richard K. Lyons

University of California, Berkeley ( email )

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