IDEAS home Printed from https://ideas.repec.org/p/ipt/iptwpa/jrc116694.html
   My bibliography  Save this paper

Measuring bilateral trade in terms of value added

Author

Listed:
  • Inaki Arto

    (Basque Centre for Climate Change – BC3)

  • Erik Dietzenbacher

    (University of Groningen)

  • Jose Manuel Rueda-Cantuche

    (European Commission - JRC)

Abstract

The increase in the fragmentation of production across countries and the subsequent growth in the trade of intermediate products have raised concerns about the suitability of conventional trade statistics to understand the economic consequences of trade. Several authors have attempted to disentangle value added content of trade. This technical report proposes a novel framework that enables to: 1 fully decompose the factor content of bilateral trade measured at the border; and 2 account for the role of the different countries and industries participating in the global value chain. Furthermore, because of the country and industry detail of this approach, it able to provide a new extension of the standard value added to exports ratio, and also reconcile the "sink-based" and "source-based" methods commonly used to report the value added in trade.

Suggested Citation

  • Inaki Arto & Erik Dietzenbacher & Jose Manuel Rueda-Cantuche, 2019. "Measuring bilateral trade in terms of value added," JRC Research Reports JRC116694, Joint Research Centre.
    • Handle: RePEc:ipt:iptwpa:jrc116694
    as

    Download full text from publisher

    File URL: https://publications.jrc.ec.europa.eu/repository/handle/JRC116694
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    2. Guillaume Daudin & Christine Rifflart & Danielle Schweisguth, 2011. "Who produces for whom in the world economy?," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(4), pages 1403-1437, November.
    3. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
    4. Hiau Looi Kee & Heiwai Tang, 2016. "Domestic Value Added in Exports: Theory and Firm Evidence from China," American Economic Review, American Economic Association, vol. 106(6), pages 1402-1436, June.
    5. Wolff, Edward N, 1985. "Industrial Composition, Interindustry Effects, and the U.S. Productivity Slowdown," The Review of Economics and Statistics, MIT Press, vol. 67(2), pages 268-277, May.
    6. Feldman, Stanley J & McClain, David & Palmer, Karen, 1987. "Sources of Structural Change in the United States, 1963-78: An Input-Output Perspective," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 503-510, August.
    7. Arnold Tukker & Erik Dietzenbacher, 2013. "Global Multiregional Input-Output Frameworks: An Introduction And Outlook," Economic Systems Research, Taylor & Francis Journals, vol. 25(1), pages 1-19, March.
    8. Inaki Arto & Jose M. Rueda-Cantuche & Ignacio Cazcarro & Antonio F. Amores & Erik Dietzenbacher & M. Victoria Roman & Zornitsa Kutlina-Dimitrova, 2018. "EU exports to the world: Effects on income," JRC Research Reports JRC113072, Joint Research Centre.
    9. Arne J. Nagengast & Robert Stehrer, 2016. "Accounting for the Differences Between Gross and Value Added Trade Balances," The World Economy, Wiley Blackwell, vol. 39(9), pages 1276-1306, September.
    10. Inaki Arto & Jose M. Rueda-Cantuche & Ignacio Cazcarro & Antonio F. Amores & Erik Dietzenbacher & M. Victoria Roman, 2018. "EU exports to the EU: Effects on employment and income," JRC Research Reports JRC113073, Joint Research Centre.
    11. Rueda-Cantuche , José M. & Sousa, Nuno, 2016. "Eu Exports To The World: Overview Of Effects On Employment And Income," DG TRADE Chief Economist Notes 2016-1, Directorate General for Trade, European Commission.
    12. Robert C. Johnson, 2014. "Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 119-142, Spring.
    13. Iñaki Arto & José Manuel Rueda-Cantuche & Antonio F. Amores & Erik Dietzenbacher & Nuno Sousa & Letizia Montinari & Anil Markandya, 2015. "EU Exports to the World: Effects on Employment and Income," JRC Research Reports JRC93237, Joint Research Centre.
    14. Inaki Arto & Jose M. Rueda-Cantuche & Ignacio Cazcarro & Antonio F. Amores & Erik Dietzenbacher & M. Victoria Roman & Zornitsa Kutlina-Dimitrova, 2018. "EU exports to the world: Effects on employment," JRC Research Reports JRC113071, Joint Research Centre.
    15. Foster-McGregor, Neil & Stehrer, Robert, 2013. "Value added content of trade: A comprehensive approach," Economics Letters, Elsevier, vol. 120(2), pages 354-357.
    16. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
    17. Marcel P. Timmer & Abdul Azeez Erumban & Bart Los & Robert Stehrer & Gaaitzen J. de Vries, 2014. "Slicing Up Global Value Chains," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 99-118, Spring.
    18. Zhi Wang & Shang-Jin Wei & Kunfu Zhu, 2013. "Quantifying International Production Sharing at the Bilateral and Sector Levels," NBER Working Papers 19677, National Bureau of Economic Research, Inc.
    19. Bart Los & Marcel P. Timmer & Gaaitzen J. Vries, 2015. "How Global Are Global Value Chains? A New Approach To Measure International Fragmentation," Journal of Regional Science, Wiley Blackwell, vol. 55(1), pages 66-92, January.
    20. João Amador & Sónia Cabral, 2016. "Global Value Chains: A Survey Of Drivers And Measures," Journal of Economic Surveys, Wiley Blackwell, vol. 30(2), pages 278-301, April.
    21. Erik Dietzenbacher & Michael L. Lahr, 2013. "Expanding Extractions," Economic Systems Research, Taylor & Francis Journals, vol. 25(3), pages 341-360, September.
    22. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    23. Bart Los & Marcel P. Timmer & Gaaitzen J. de Vries, 2016. "Tracing Value-Added and Double Counting in Gross Exports: Comment," American Economic Review, American Economic Association, vol. 106(7), pages 1958-1966, July.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. William Connell Garcia & Magdalena Kizior & Wouter Simons, 2020. "Analysing Automobile Industry Supply Chains," European Economy - Discussion Papers 134, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    2. Robert Stehrer, 2021. "Source – Assembly – Sink: Value Added Flows in the Global Economy," wiiw Working Papers 209, The Vienna Institute for International Economic Studies, wiiw.
    3. Inaki Arto & Jose M. Rueda-Cantuche & M. Victoria Roman & Ignacio Cazcarro & Antonio F. Amores & Erik Dietzenbacher, 2020. "EU trade in CO2 emissions," JRC Research Reports JRC120523, Joint Research Centre.
    4. Marta Fana & Davide Villani, 2021. "The Automotive Supply Chain in Europe: An Input-Output Analysis of Value Added and Employment Composition," JRC Working Papers on Labour, Education and Technology 2021-01, Joint Research Centre.
    5. Klemen Knez & Andreja Jaklič & Metka Stare, 2021. "An extended approach to value chain analysis," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-37, December.
    6. Inaki Arto & Jose M. Rueda-Cantuche & M. Victoria Roman & Ignacio Cazcarro & Antonio F. Amores & Erik Dietzenbacher, 2020. "EU Trade in Value Added," JRC Research Reports JRC120522, Joint Research Centre.
    7. MARSCHINSKI Robert & DE AMORES HERNANDEZ Antonio & AMOROSO Sara & BAUER Peter & CARDANI Roberta & CSEFALVAY Zoltan & GENTY Aurelien & GKOTSIS Petros & GREGORI Wildmer & GRASSANO Nicola & HERNANDEZ GUE, 2021. "EU competitiveness: recent trends, drivers, and links to economic policy: A Synthesis Report," JRC Research Reports JRC123232, Joint Research Centre.
    8. Inaki Arto & Jose M. Rueda-Cantuche & M. Victoria Roman & Ignacio Cazcarro & Antonio F. Amores & Erik Dietzenbacher, 2020. "EU trade in Employment," JRC Research Reports JRC120520, Joint Research Centre.
    9. Fana, Marta & Villani, Davide, 2022. "Decomposing the Automotive Supply Chain: Employment, Value Added and Occupational Structure," Structural Change and Economic Dynamics, Elsevier, vol. 62(C), pages 407-419.
    10. Maria Llop, 2022. "Quantifying the employment impacts of gross exports: a global accounting perspective," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-17, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nenci, Silvia & Fusacchia, Ilaria & Giunta, Anna & Montalbano, Pierluigi & Pietrobelli, Carlo, 2022. "Mapping global value chain participation and positioning in agriculture and food: stylised facts, empirical evidence and critical issues," Bio-based and Applied Economics Journal, Italian Association of Agricultural and Applied Economics (AIEAA), vol. 11(2), July.
    2. João Amador & Sónia Cabral, 2017. "Networks of Value-added Trade," The World Economy, Wiley Blackwell, vol. 40(7), pages 1291-1313, July.
    3. Marcel P Timmer & Sébastien Miroudot & Gaaitzen J de Vries, 2019. "Functional specialisation in trade," Journal of Economic Geography, Oxford University Press, vol. 19(1), pages 1-30.
    4. Marilia Marcato & Carolina Baltar & Fernando Sarti, 2019. "International competitiveness in a vertically fragmented production structure: empirical challenges and evidence," Economics Bulletin, AccessEcon, vol. 39(2), pages 876-893.
    5. Ilaria Fusacchia, 2020. "Evaluating the Impact of the US–China Trade War on Euro Area Economies: A Tale of Global Value Chains," Italian Economic Journal: A Continuation of Rivista Italiana degli Economisti and Giornale degli Economisti, Springer;Società Italiana degli Economisti (Italian Economic Association), vol. 6(3), pages 441-468, November.
    6. Jangam, Bhushan Praveen & Rath, Badri Narayan, 2020. "Cross-country convergence in global value chains: Evidence from club convergence analysis," International Economics, Elsevier, vol. 163(C), pages 134-146.
    7. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    8. Zhao, Yuhuan & Liu, Ya & Qiao, Xiaoyong & Wang, Song & Zhang, Zhonghua & Zhang, Yongfeng & Li, Hao, 2018. "Tracing value added in gross exports of China: Comparison with the USA, Japan, Korea, and India based on generalized LMDI," China Economic Review, Elsevier, vol. 49(C), pages 24-44.
    9. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    10. Nagendra Shrestha & Kiyotaka Sato, 2021. "Global and regional shock transmission: an Asian perspective," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 10(1), pages 1-25, December.
    11. Arne J. Nagengast & Robert Stehrer, 2016. "Accounting for the Differences Between Gross and Value Added Trade Balances," The World Economy, Wiley Blackwell, vol. 39(9), pages 1276-1306, September.
    12. Pao‐Li Chang & Phuong T. B. Nguyen, 2022. "Global value chains and the CPTPP," The World Economy, Wiley Blackwell, vol. 45(12), pages 3780-3832, December.
    13. Antimiani, Alessandro & Fusacchia, Ilaria & Salvatici, Luca, 2016. "Value Added Trade Restrictiveness Indexes. Measuring Protection with Global Value Chains," Conference papers 332745, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    14. Raffaele Giammetti & Alberto Russo & Mauro Gallegati, 2020. "Key sectors in input–output production networks: An application to Brexit," The World Economy, Wiley Blackwell, vol. 43(4), pages 840-870, April.
    15. Felice, Giulia & Tajoli, Lucia, 2021. "Trade balances and global value chains: Is there a link?," Structural Change and Economic Dynamics, Elsevier, vol. 59(C), pages 228-246.
    16. Chen, Quanrun & Chen, Xikang & Pei, Jiansuo & Yang, Cuihong & Zhu, Kunfu, 2020. "Estimating domestic content in China’s exports: Accounting for a dual-trade regime," Economic Modelling, Elsevier, vol. 89(C), pages 43-54.
    17. Syed Al-Helal Uddin, 2016. "Value-added Trade, Exchange Rate Pass-Through and Trade Elasticity: Revisiting the Trade Competitiveness," 2016 Papers pud11, Job Market Papers.
    18. Michael Peneder & Gerhard Streicher, 2016. "De- versus Re-industrialisation: Is Structural Change Reversible?," WIFO Working Papers 506, WIFO.
    19. Laura Dell'Agostino, 2017. "Italy’S Participation In International Supply And Production Networks Using Value Added Trade Data," Departmental Working Papers of Economics - University 'Roma Tre' 0228, Department of Economics - University Roma Tre.
    20. Reddy, Ketan & Sasidharan, Subash, 2024. "Global value chains, productivity and markup: Evidence from India," International Review of Economics & Finance, Elsevier, vol. 89(PB), pages 250-271.

    More about this item

    Keywords

    global value chain; vertical specialization; international trade;
    All these keywords.

    JEL classification:

    • F01 - International Economics - - General - - - Global Outlook
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ipt:iptwpa:jrc116694. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Publication Officer (email available below). General contact details of provider: https://edirc.repec.org/data/ipjrces.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.