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Production Networks and “The Great Convergence”

Author

Listed:
  • Tadashi Ito

    (Faculty of International Social Sciences, Gakushuin University, Japan)

Abstract

This paper shows that the gap between domestic production values and domestic value- added is growing with the deepening of production networks, which is a major phenomenon of economic globalization. Then, the utmost interest of this paper is analyzed: how the domestic value-added share change is related to total production value, number of employees, per-worker production value, and per-worker renumeration. The analyses show that the lowering of domestic value-added shares is related to increases in total production, number of employees, and per-worker production value. Moreover, it shows supporting evidence on the effect of the lower domestic value-added share on narrowing gaps in worker renumeration between the developed and developing countries, which is theoretically predicted by Baldwin (2016).

Suggested Citation

  • Tadashi Ito, 2020. "Production Networks and “The Great Convergence”," Public Policy Review, Policy Research Institute, Ministry of Finance Japan, vol. 16(1), pages 73-94, February.
    • Handle: RePEc:mof:journl:ppr16_01_04
    as

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    File URL: http://www.mof.go.jp/english/pri/publication/pp_review/ppr16_01_04.pdf
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    References listed on IDEAS

    as
    1. Tadashi Ito & Lorenzo Rotunno & Pierre-Louis Vézina, 2017. "Heckscher–Ohlin: Evidence from Virtual Trade in Value Added," Review of International Economics, Wiley Blackwell, vol. 25(3), pages 427-446, August.
    2. Leamer, Edward E, 1980. "The Leontief Paradox, Reconsidered," Journal of Political Economy, University of Chicago Press, vol. 88(3), pages 495-503, June.
    3. Ito, Tadashi & Vézina, Pierre-Louis, 2016. "Production fragmentation, upstreamness, and value added: Evidence from Factory Asia 1990–2005," Journal of the Japanese and International Economies, Elsevier, vol. 42(C), pages 1-9.
    4. Trefler, Daniel, 1993. "International Factor Price Differences: Leontief Was Right!," Journal of Political Economy, University of Chicago Press, vol. 101(6), pages 961-987, December.
    5. Trefler, Daniel, 1995. "The Case of the Missing Trade and Other Mysteries," American Economic Review, American Economic Association, vol. 85(5), pages 1029-1046, December.
    6. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2008. "How Much of Chinese Exports is Really Made In China? Assessing Domestic Value-Added When Processing Trade is Pervasive," NBER Working Papers 14109, National Bureau of Economic Research, Inc.
    7. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Globalization; International fragmentation of production processes; value-added; Input-Output Database;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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