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International Value-Added Linkages in Development Accounting

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Abstract

We generalise the traditional development-accounting framework to an open economy setting. In addition to factor endowments and productivity, relative factor costs emerge as a source of real-income variation across countries. These are determined by bilateral trade frictions (which underpin the patterns of "international value-added linkages") and the global distribution of factor endowments and final expenditures. We use information on endowments, trade balances and value-added trade to back out the relative factor costs of 40 major economies in a theory-consistent manner. This reduces the variation in "residual" TFP required to explain the observed per-capita income differences by more than one half.

Suggested Citation

  • Robert Zymek & Alejandro Cunat, 2017. "International Value-Added Linkages in Development Accounting," Edinburgh School of Economics Discussion Paper Series 281, Edinburgh School of Economics, University of Edinburgh.
    • Handle: RePEc:edn:esedps:281
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    3. Antonio Navas & Antonella Nocco, 2021. "Trade liberalization, selection, and technology adoption with vertical linkages," Review of International Economics, Wiley Blackwell, vol. 29(4), pages 979-1012, September.
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    5. Alonso de Gortari, 2019. "Disentangling Global Value Chains," NBER Working Papers 25868, National Bureau of Economic Research, Inc.
    6. Fritz Breuss, 2018. "25 Years Single Market: Which Trade and Growth Effects?," WIFO Working Papers 572, WIFO.

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    More about this item

    Keywords

    world input-output; development accounting; transfer effect;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F15 - International Economics - - Trade - - - Economic Integration
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development

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