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Follow the Value Added: Tracking Bilateral Relations in Global Value Chains

Alessandro Borin and Michele Mancini

MPRA Paper from University Library of Munich, Germany

Abstract: Following the spread of global value chains new statistical tools, the Inter-Country Input-Output tables, and new analytical frameworks have been recently developed to provide an adequate representation of supply and demand linkages among the economies. Koopman, Wang and Wei propose an innovative accounting methodology to decompose a country's total gross exports by source and final destination of their embedded value added. However this decomposition presents some limitations and relevant inexactnesses in some of its components. We develop their approach further by deriving a fully consistent counterpart for bilateral trade flows, also at the sectoral level, addressing the main shortcomings of previous works. We also provide correct breakdown of the foreign content in total (world) trade flows and a brand new classification of these components that take the perspective of the exporting country. Finally, drawing on our methodology we derive for the first time a precise measure of international trade generated within global production networks. Two examples of empirical applications with relevant policy implications are also provided.

Keywords: global value chains; input-output tables; trade in value added; trade elasticity (search for similar items in EconPapers)
JEL-codes: E16 F1 F14 F15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-acc and nep-int
Date: 2017-11-14
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