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Russia’s Global Value Chain using a Modified World Input-Output Data

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  • Kuboniwa, Masaaki

Abstract

In light of the growing intermediate goods trade, the WTO, the OECD, and the United Nations have emphasized the importance of a new concept of trade in value-added (TiVA) in place of traditional gross trade. Using this new concept, this study further develops theoretical and empirical research on Russia’s global trade network generated by value-added chains. First, based on global and local equilibrium conditions of a global input–output model, we prove the fundamental theorem on the relationship between gross trade balances in value-added and gross terms: the total sum of a country’s (country r) trade balances with many countries (countries 1, 2,…, s, …, R; s ≠ r) in value-added equals that in gross terms, namely, the total sum of differentials between country r’s trade balances with country s in value-added and gross terms equals zero: ([eproduction of equations for the functions]−[ reproduction of equations for the functions]) + ([reproduction of equations for the functions]−[ reproduction of equations for the functions]) + ⋯ + ([reproduction of equations for the functions]−[reproduction of equations for the functions]) + ⋯ + ([reproduction of equations for the functions]−[ reproduction of equations for the functions]) = 0 for 𝑠 ≠ 𝑟, where [reproduction of equations for the functions] and [reproduction of equations for the functions] denote country r’s trade balances with country s in value-added and gross terms, respectively. Within this general identity condition, [reproduction of equations for the functions] can be less than or greater than [reproduction of equations for the functions], depending on inter-country-sector technical relations and sectoral value-added ratios. We also show the equivalence theorem between TiVA and the factor (value-added) content of trade proposed by Trefler. We employ a modified version of aggregated World Input–Output Data (WIOD) with eight countries/regions (BRIC, the EU, the USA, Japan, and the Rest of the World (ROW)) and twenty sectors for 2005 and 2010. Modifications are performed to correct an underestimation of Russian oil and gas trade flows and the value-added ratios in the original data, which is essential to correctly understand Russia’s value chains with the EU and other countries.

Suggested Citation

  • Kuboniwa, Masaaki, 2014. "Russia’s Global Value Chain using a Modified World Input-Output Data," RRC Working Paper Series 50, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    • Handle: RePEc:hit:rrcwps:50
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    References listed on IDEAS

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    1. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    2. Masaaki Kuboniwa, 2012. "Diagnosing the ‘Russian Disease’: Growth and Structure of the Russian Economy," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 54(1), pages 121-148, March.
    3. Foster-McGregor, Neil & Stehrer, Robert, 2013. "Value added content of trade: A comprehensive approach," Economics Letters, Elsevier, vol. 120(2), pages 354-357.
    4. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
    5. Kuboniwa, Masaaki, 2014. "A comparative analysis of the impact of oil prices on oil-rich emerging economies in the Pacific Rim," Journal of Comparative Economics, Elsevier, vol. 42(2), pages 328-339.
    6. Marcel Timmer & Abdul A. Erumban & Reitze Gouma & Bart Los & Umed Temurshoev & Gaaitzen J. de Vries & I–aki Arto & Valeria Andreoni AurŽlien Genty & Frederik Neuwahl & JosŽ M. Rueda?Cantuche & Joseph , 2012. "The World Input-Output Database (WIOD): Contents, Sources and Methods," IIDE Discussion Papers 20120401, Institue for International and Development Economics.
    7. Kuboniwa, Masaaki, 2014. "Bilateral Equivalence between Trade in Value Added and Value Added Content of Trade," Discussion Paper Series 601, Institute of Economic Research, Hitotsubashi University.
    8. Kuboniwa, Masaaki, 2014. "Fundamental Theorem on the Relationship between Trade Balances in Value Added and Gross Terms: Amendment," Discussion Paper Series 600, Institute of Economic Research, Hitotsubashi University.
    9. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    10. 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.
    11. Robert Stehrer, 2012. "Trade in Value Added and the Valued Added in Trade," wiiw Working Papers 81, The Vienna Institute for International Economic Studies, wiiw.
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    Cited by:

    1. Henryk Gurgul & Lukasz Lach, 2016. "Comparative advantage of the EU in global value chains: How important and efficient are new EU members in transition?," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 17(1), pages 21-58.
    2. Iwasaki, Ichiro, 2018. "International Presence of the Japanese Study of Russian and East European Economies," RRC Working Paper Series 74, Russian Research Center, Institute of Economic Research, Hitotsubashi University.

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    More about this item

    Keywords

    value chain; trade in value-added; gross trade; input–output; BRIC;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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