Modelling the Evolution of National Economies Based on Input-Output Networks

Uncovering the evolutionary dynamics of economies is helpful for us to design economic policy. This paper develops an economic evolution model by examining the coupled dynamics of industry growth and interindustry structure. For each industry, its economic properties (mainly characterized by price and quantity) are incorporated into the model. The input-output relationships among different industries are described as input-output networks, in which nodes represent industries, and weights represent technological and economic constraints between pairing industries. By measuring the dynamic importance of each node, we find that all the nodes in the input-output networks have the same dynamic importance. On the basis of this empirical regularity and the rational expectation assumption, we show that the coupled dynamics of the economic properties of nodes and input-output networks can explain the evolutionary dynamics of national economies.