Sectoral Investment in Input-Output Frameworks, a Reply

Abstract This note responds to the comments by Garbellini (2026) on the treatment of demand shocks in the Input-Output model in Stamegna et al. (2024). We show that the increase in arms expenditure is correctly identified as an investment shock, while increases in public expenditure on environmental protection, education, and health services should be more appropriately interpreted as public consumption shocks. Once import shares consistent with this interpretation are applied, the central result of Stamegna et al. (2024) – namely, the higher employment effects of civilian expenditure relative to arms procurement – is further reinforced, with only minor changes in estimates. Furthermore, in Stamegna et al. (2024) the shares of arms imports are estimated using data for European countries and, even under a zero-import-share assumption, the main results are shown to be robust. Finally, we show that reducing the dimensionality of the Input-Output table yields results that are almost identical to those that we obtain here using the disaggregated tables.