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From exports to value added to income: Accounting for bilateral income transfers

Author

Listed:
  • Bohn, Timon
  • Brakman, Steven
  • Dietzenbacher, Erik

Abstract

The existence of multinational firms and the rise of global value chains raise the question how international trade contributes to a country's income. Ownership relations between, for example, headquarters and subsidiaries result in international income transfers. These transfers are ignored in standard trade data. Taking them into account in a global input-output analysis allows us to assess how much income is generated in one country due to the consumption of final products in another country. This provides a new perspective compared to the concept of value-added exports introduced by Johnson and Noguera (2012). For the US, we find that the income generated by foreign consumption is 51% higher than the value added in the US that is generated by foreign consumption. Similar findings hold for other countries as well, but to a lesser extent. The implication is that the current account deficit of the US almost disappears from the income perspective.

Suggested Citation

  • Bohn, Timon & Brakman, Steven & Dietzenbacher, Erik, 2021. "From exports to value added to income: Accounting for bilateral income transfers," Journal of International Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:inecon:v:131:y:2021:i:c:s0022199621000763
    DOI: 10.1016/j.jinteco.2021.103496
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    References listed on IDEAS

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    3. Meng, Bo & Gao, Yuning & Ye, Jiabai & Zhang, Meichen & Xing, Yuqing, 2022. "Trade in factor income and the US-China trade balance," China Economic Review, Elsevier, vol. 73(C).

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    More about this item

    Keywords

    International trade; Multinational firms; Gross national income; Value-added trade; Trade balance;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts

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