Measuring Openness: VADE, Not Trade

Mehrene Larudee

Oxford Development Studies, 2012, vol. 40, issue 1, 119-137

Abstract: The ratio of trade (exports plus imports) to GDP is often used to gauge the orientation of a country's economic activity to the world market; but GDP measures value added, whereas trade is measured as gross value and double-counts imported inputs embodied in exports. High trade/GDP ratios can thus mislead policymakers, especially when low domestic-content (DC) assembly production displaces high DC traditional exports, as in Mexico and the Caribbean in the 1980s and 1990s. This paper proposes a better measure of openness, which is the ratio of value added destined for exports (VADE) to GDP. It outlines methods for making both rough and more precise estimates of VADE, and presents illustrative results for China, the Dominican Republic and Mexico. In all of these cases VADE/GDP is no more than one-third, and probably closer to one-quarter, of trade/GDP.

Date: 2012
References: View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/13600818.2011.648372 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:oxdevs:v:40:y:2012:i:1:p:119-137

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/CODS20

DOI: 10.1080/13600818.2011.648372

Access Statistics for this article

Oxford Development Studies is currently edited by Jo Boyce and Frances Stewart

More articles in Oxford Development Studies from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().