  We model sectoral production by cascading binary compounding processes. The
sequence of processes is discovered in a self-similar hierarchical structure
stylized in the economy-wide networks of production. Nested substitution
elasticities and Hicks-neutral productivity growth are measured such that the
general equilibrium feedbacks between all sectoral unit cost functions
replicate the transformation of networks observed as a set of two temporally
distant input-output coefficient matrices. We examine this system of unit cost
functions to determine how idiosyncratic sectoral productivity shocks propagate
into aggregate macroeconomic fluctuations in light of potential network
transformation. Additionally, we study how sectoral productivity increments
propagate into the dynamic general equilibrium, thereby allowing network
transformation and ultimately producing social benefits.
