Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322154 
Year of Publication: 
2025
Series/Report no.: 
LEM Working Paper Series No. 2025/22
Version Description: 
July 1, 2025
Publisher: 
Scuola Superiore Sant'Anna, Laboratory of Economics and Management (LEM), Pisa
Abstract: 
We develop a general equilibrium production network model that spans two periods and incorporates heterogeneous households, firm-specific CobbDouglas production technologies, and a time-to-build mechanism for capital formation. Within this dynamic framework, we establish the existence and uniqueness of a competitive equilibrium and provide explicit analytical solutions for key economic variables. In particular, we derive closed-form expressions for the welfare and real interest rate effects of supply-side shocks occurring at different points in time. We calibrate the model using inputoutput data from the Italian economy, identifying key structural features such as the prominent roles of the real estate, food, and tourism-related sectors. We then extend the calibration to incorporate household heterogeneity by skill level and examine the consequences in terms of welfare and real interest rates of a climate-related productivity shock. This shock is sectorspecific, time-dependent, and scaled according to differential exposure to climate risks. Our results show that climate-induced negative supply-side shocks generate disproportionate welfare losses for low-skilled households and induce nontrivial adjustments in real interest rates across sectors.
Subjects: 
Production Network
Capital Formation
Heterogeneous Agents
Two-date Model
JEL: 
C68
D51
D57
D58
E43
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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