Search arXiv⌕ Search
Home/Archive/arXiv

arXiv · 1810.07774

How production networks amplify economic growth

James McNerney·Charles Savoie·Francesco Caravelli·Vasco M. Carvalho·J. Doyne Farmer
View original source ↗Read source document ↗Export metadata ↓

Abstract

Technological improvement is the most important cause of long-term economic growth. We study the effects of technology improvement in the setting of a production network, in which each producer buys input goods and converts them to other goods, selling the product to households or other producers. We show how this network amplifies the effects of technological improvements as they propagate along chains of production. Longer production chains for an industry bias it towards faster price reduction, and longer production chains for a country bias it towards faster GDP growth. These predictions are in good agreement with data and improve with the passage of time, demonstrating a key influence of production chains in price change and output growth over the long term.

Explore related subjects

q-fin.GNphysics.soc-ph

Keep this discovery

Explore connections, maps & timelines

BibTeXRIS

James McNerney, Charles Savoie, Francesco Caravelli, Vasco M. Carvalho, J. Doyne Farmer. 2021-11-17. How production networks amplify economic growth. https://arxiv.org/abs/1810.07774

Cite the original work for its findings. Save a collection to share your selection of sources.

KEEP EXPLORING

Related papers

arXiv2026

Compliant AI Infrastructure for Regulated Finance: A tiered multi-agent framework with DLT audit trails for financial operations in DACH

We present a compliance-first architecture for AI in regulated finance that treats regulation as an orientation layer rather than a deterministic ruleset. A matrix of regulatory intent and exposure provides a compact classification handle, which a governed policy compiler then maps into concrete prohibitions, obligations and runtime budgets. Prohibitions constrain feasibility and block externalisation, while obligations extend tasks with artefacts that must meet explicit admissibility criteria. Committee activation remains policy-driven and proportionate, preserving efficiency while ensuring supervisory oversight. Evidence, decisions and reason codes are bound to a permissioned DAG with deterministic timestamping, enabling replay, provenance checks and clear attribution of failure. Clause-level legal indexing with effective dates and capability-based agent routing ensure portability across DACH and the wider EU. The result is assurance by construction: compliance is embedded in execution and verifiable by auditors without sacrificing proportionality or transparency.

q-fin.GN↗
arXiv2026

Multi-Agent AI Architecture for Regulated Insurers: A generic AI framework under Solvency II and the AI Act in Austria and Germany

This paper proposes a formal multi-agent architecture for implementing enterprise AI in regulated insurance firms, integrating economic theory with institutional design. The framework synthesises three core theoretical perspectives: Arrow's risk pooling theory to formalise risk transformation under uncertainty, Nash equilibrium to model strategic interactions between decision agents, and Principal-Agent theory to address incentive alignment under information asymmetry. The insurer is modelled as a constrained optimisation entity operating under solvency, legal, ESG, and operational boundaries, with specific focus on the regulatory contexts of Austria and Germany. The architecture decomposes the firm into multiple specialised agents, each representing distinct functional domains such as capital management, underwriting, claims processing, compliance, fraud detection, and client interaction. Human-in-the-loop agents are integrated through a tiered access control system, ensuring differentiated data visibility and decision influence based on user roles. An orchestrator agent supervises inter-agent coordination, enforcing regulatory admissibility and institutional coherence under frameworks such as Solvency II, the AI Act, and the Insurance Distribution Directive. Protocol integration is based on asynchronous execution and dual-layer communication infrastructures, specifically the Model Context Protocol (MCP) and Agent-to-Agent (A2A) messaging. This structure enables the systematic design of compliant, auditable multi-agent systems aligned with the institutional logic of financial firms in Austria and Germany.

q-fin.GN↗
arXiv2026

The Virtue of Sparsity in Complexity

Sparsity or complexity? In modern high-dimensional asset pricing, these are often viewed as competing principles: recent empirical evidence favors richer models, while economic intuition has long favored parsimony. We reconcile this tension by distinguishing capacity sparsity-restrictions on effective model capacity-from factor sparsity-the parsimonious structure of priced risks. Revisiting the benchmark empirical design of Didisheim et al. (2025), we combine nonlinear feature expansions with basis pursuit, using column generation and GPU acceleration to scale estimation to 432 million candidate factors. Reaching this scale reveals a reversal in out-of-sample performance: sparse portfolios trail dense ridgeless benchmarks at lower complexity but achieve a higher Sharpe ratio and lower pricing error at the largest candidate set. Capacity expansion and factor sparsity are therefore complements: enlarging the candidate space allows a parsimonious pricing kernel to outperform its dense counterpart.

q-fin.GN↗