Thiago Sevilhano MartinezOrrillo, MiguelInstituto de Pesquisa Econômica Aplicada2026-04-012026-04-012026-04MARTINEZ, Thiago; ORRILLO, Miguel. Sector-differentiated tax exemptions in investment networks (Express Publication). Brasília: Ipea, Apr. 2026. (Discussion Paper, n. 3197). Disponível em: https://repositorio.ipea.gov.br/handle/11058/20291https://repositorio.ipea.gov.br/handle/11058/20291We analyze sector-differentiated subsidies in production and investment net works. Our work expands Liu’s (2019) model of industrial policy in production networks to include the investment goods network of the economy. We show how Liu’s main theoretical results must be modified when two distinct networks connect the economy’s sectors. Then, we present two applications of this theory to Brazil. Our first finding is that incorporating the investment network leads to changes in the position of sectors that produce investment goods and services in the sectoral priority ranking for incentives. For our second application, we analyze the impact of sector-differentiated federal tax exemptions in Brazil in 2019, estimated at R$ 265 billion, or 3.6% of Brazil’s GDP. We calculate that the impact of these subsidies on aggregate income was nearly zero. However, in a counterfactual scenario where sub sidies are redistributed among sectors based on the theory-derived ranking, income increases by up to 1.7% within the investment-augmented production network.47engAcesso AbertoPreliminary PublicationInstituto de Pesquisa Econômica AplicadaMacroeconomiaMatriz de Insumo-ProdutoIsenções FiscaisPolítica IndustrialSubsídiosLicença ComumReproduction of this text and the data contained within is allowed as long as the source is cited. Reproduction for commercial purposes is prohibited. É permitida a reprodução deste texto e dos dados nele contidos, desde que citada a fonte. Reproduções para fins comerciais são proibidas.Investment networksMacroeconomics and networksInput-OutputTax exemptionsIndustrial PolicySubsidiesC Mathematical and Quantitative Methods::C6 Mathematical Methods - Programming Models - Mathematical and Simulation Modeling::C67 Input-Output ModelsD Microeconomics::D5 General Equilibrium and Disequilibrium::D50 GeneralE Macroeconomics and Monetary Economics::E2 Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy::E22 Investment - Capital - Intangible Capital - CapacityH Public Economics::H2 Taxation, Subsidies, and Revenue::H25 Business Taxes and SubsidiesO Economic Development, Innovation, Technological Change, and Growth::O2 Development Planning and Policy::O25 Industrial PolicyRedes de investimentoMacroeconomia e redesIsenções tributária