Real Value Added, Incidence and Comovement (New Paper)

I develop a theory of real value-added incidence for arbitrary firm clusters: sectors, regions, countries, supply chains, or nongeographic groups of firms. In a general-equilibrium economy with input-output linkages, heterogeneous households, and rent-generating wedges, I show that cluster real-value-added growth decomposes into a factor-supply component and total factor productivity (TFP), with TFP further split into technology, competitiveness, and distributional reallocation. The sufficient statistics generalize Domar weights from aggregate productivity accounting to incidence accounting: they measure how firm shocks, factor supplies, household expenditure, firm revenue, markups, ownership, and network structure affect the real value added of a given cluster. I implement the decomposition for U.S. sectors. Aggregate TFP is shaped by a small set of sectoral contributors and drags: computers and electronics and oil and gas extraction are major positive contributors, while farms, construction, and housing are major drags. Sectoral TFP comovement is distinct from level contribution: large Domar sectors and upstream cost-central sectors tend to move against the rest of the economy, while sectors with concentrated downstream customer bases are less synchronized with the aggregate. Around the Great Recession, the TFP measure reveals pre-crisis expansion without efficiency gains and crisis-period downsizing with rising measured efficiency, patterns not visible in revenue data; it also identifies selective medium-run scarring.