We argue that the network of investment production and purchases across sectors is an important propagation mechanism for understanding business cycles. Empirically, we show that the majority of investment goods are produced by a few “investment hubs,” which are more cyclical than other sectors. We embed this investment network into a multisector business cycle model and show that sector-specific shocks to the investment hubs and their key suppliers have large effects on aggregate employment and drive down labor productivity. Quantitatively, we find that sector-specific shocks to hubs and their suppliers account for an increasing share of aggregate fluctuations over time, generating the declining cyclicality of labor productivity and other changes in business cycle patterns since the 1980s.

Measuring occupational mobility from the Current Population Survey using retrospective or longitudinal methods generates substantially different outcomes, in both levels and trends. Using a generalized method of moments technique, we estimate the level of occupational mobility and the measurement error in both of these measures for 1981–2018. We estimate that occupational mobility has been trending down, particularly since 2000, consistent with retrospective measures of occupational mobility. However, estimated mobility is 2–3 percentage points or 60%–70% higher than retrospective measures. Measurement error in longitudinal measures is large and has been worsening over time.

We study structural change in production networks for intermediate inputs (inputoutput network) and new capital (investment network). For each network, we document that the share of output produced by services (relative to goods) is rising over time. While the relative prices of services that produce intermediates and consumption are rising, we find that the relative price of services that produce investment is falling over time. We then develop a multi-sector growth model to study these trends and their implications for economic growth. To match the relative price trends, inputs to intermediates production are complements and inputs to investment production are substitutes. Hence, structural change endogenously reallocates resources to the slowest growing intermediates producers and the fastest growing investment producers. Growth accounting exercises reveal that investment-specific technical change accounts for an increasing share of U.S. aggregate growth, with 20% of aggregate growth since 2000 due to investment structural change. Growth projections from our model show that structural change within investment networks alone can offset stagnating or declining growth in other sectors due to Baumol’s cost disease.