Should high domestic value added be policy emphasis in the era of global production sharing?: Evidence from Thailand

Wannaphong Durongkaveroj

Economics Bulletin, 2021, vol. 41, issue 3, 1631-1641

Abstract: This paper examines the current emphasis on the share of domestic value added in exports ('value added ratio') as a policy guidance in trade and industry policy making in developing countries. The hypothesis is that the policy emphasis on value added ratio is inconsistent with the objective of achieving economic development through export-oriented development strategy in the era of global production sharing. The analysis focuses on two indicators of developmental outcomes: the ratio of labor income in total value added and the ratio of wage to profit. The formal empirical analysis adopts Thailand as a case study and employs a mixture of input-output analysis and panel econometrics using the input-output tables of Thailand covering 74 manufacturing sectors for 1990, 1995, 2000, 2005 and 2010. The results suggest that industries characterized by higher value added ratio do not have potential to generate greater developmental outcomes.

Keywords: Domestic value added; global production sharing; labor income share; inequality; Thailand (search for similar items in EconPapers)
JEL-codes: F1 O1 (search for similar items in EconPapers)
Date: 2021-09-17
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