International Value-Added Linkages in Development Accounting

Robert Zymek and Alejandro Cunat

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

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.

Keywords: world input-output; development accounting; transfer effect (search for similar items in EconPapers)
JEL-codes: E01 F15 F40 F62 F63 (search for similar items in EconPapers)
Pages: 48
Date: 2017-07
New Economics Papers: this item is included in nep-int and nep-mac
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Citations: View citations in EconPapers (2)

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http://www.econ.ed.ac.uk/papers/id281_esedps.pdf

Related works:
Working Paper: International Value-Added Linkages in Development Accounting (2018)
Working Paper: International Value-Added Linkages in Development Accounting (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:281

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