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Fragmentation and Trade in Value Added over Four Decades

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  • Robert C. Johnson
  • Guillermo Noguera

Abstract

We combine data on trade, production, and input use to compute the value added content of trade for forty-two countries from 1970 to 2009. For the world, the ratio of value added to gross trade falls by ten to fifteen percentage points, with two-thirds of this decline in the last two decades. Across countries, declines range from zero to twenty-five percentage points, with large declines concentrated among countries undergoing structural transformation. Across bilateral trade partners, declines are larger for nearby partners and partners that adopt regional trade agreements. That is, both policy and non-policy trade costs shape production fragmentation.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18186.

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Date of creation: Jun 2012
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Handle: RePEc:nbr:nberwo:18186

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References

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  1. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
  2. Jonathan Eaton & Samuel Kortum & Brent Neiman & John Romalis, 2011. "Trade and the Global Recession," NBER Working Papers 16666, National Bureau of Economic Research, Inc.
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  5. Benjamin Bridgman, . "Energy Prices and the Expansion of World Trade," Departmental Working Papers 2003-14, Department of Economics, Louisiana State University.
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  7. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
  8. James E. Anderson & Eric van Wincoop, 2000. "Gravity with Gravitas: A Solution to the Border Puzzle," Boston College Working Papers in Economics 485, Boston College Department of Economics.
  9. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2011. "Give Credit where Credit is Due: Tracing Value Added in Global Production Chains," Working Papers 312011, Hong Kong Institute for Monetary Research.
  10. Benjamin Bridgman, 2008. "Data files for "Energy Prices and the Expansion of World Trade"," Technical Appendices 06-199, Review of Economic Dynamics.
  11. Anne-Célia Disdier & Keith Head, 2008. "The Puzzling Persistence of the Distance Effect on Bilateral Trade," The Review of Economics and Statistics, MIT Press, vol. 90(1), pages 37-48, February.
  12. Anderson, James & Yotov, Yoto, 2012. "Terms of Trade and Global Efficiency Effects of Free Trade Agreements, 1990-2002," School of Economics Working Paper Series 2012-3, LeBow College of Business, Drexel University.
  13. Tony Venables & Richard Baldwin, 2011. "Relocating the value chain: off-shoring and agglomeration in the global economy," Economics Series Working Papers 544, University of Oxford, Department of Economics.
  14. 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.
  15. Jayjit Roy, 2010. "Do Customs Union Members Engage in More Bilateral Trade than Free-Trade Agreement Members?," Review of International Economics, Wiley Blackwell, vol. 18(4), pages 663-681, 09.
  16. Lorenzo Caliendo & Fernando Parro, 2012. "Estimates of the Trade and Welfare Effects of NAFTA," NBER Working Papers 18508, National Bureau of Economic Research, Inc.
  17. Gianluca OREFICE & Nadia ROCHA, 2011. "Deep integration and production networks: an empirical analysis," Departmental Working Papers 2011-24, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  18. Bridgman, Benjamin, 2012. "The rise of vertical specialization trade," Journal of International Economics, Elsevier, vol. 86(1), pages 133-140.
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Citations

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Cited by:
  1. Richard Pomfret & Victor Pontines, 2013. "Exchange Rate Policy and Regional Trade Agreements : A Case of Conflicted Interests?," Trade Working Papers 23713, East Asian Bureau of Economic Research.
  2. Tomohiro MACHIKITA & Yasushi UEKI, 2013. "Who Disseminates Technology to Whom, How, and Why: Evidence from Buyer-Seller Business Networks," Working Papers DP-2013-26, Economic Research Institute for ASEAN and East Asia (ERIA).
  3. Rudolfs Bems & Robert C. Johnson, 2012. "Value-Added Exchange Rates," NBER Working Papers 18498, National Bureau of Economic Research, Inc.
  4. Elisabeth Beusch & Barbara Döbeli & Andreas M. Fischer & Pinar Yesin, 2013. "Merchanting and Current Account Balances," Working Papers 2013-06, Swiss National Bank.
  5. Haruka Yane, 2013. "Prospects for Trade in Intermediates and Trade in Services: What Does the Gravity Model of Bilateral Trade Tell Us?," OSIPP Discussion Paper 13E002, Osaka School of International Public Policy, Osaka University.
  6. Richard Frensch & Jan Hanousek & Evžen Kočenda, 2013. "Incomplete Specialization and Trade in Parts and Components," William Davidson Institute Working Papers Series wp1044, William Davidson Institute at the University of Michigan.
  7. Richard Baldwin & Javier Lopez-Gonzalez, 2013. "Supply-Chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses," NBER Working Papers 18957, National Bureau of Economic Research, Inc.
  8. Richard Baldwin, 2014. "WTO 2.0: Governance of 21st century trade," The Review of International Organizations, Springer, vol. 9(2), pages 261-283, June.
  9. Teresa C. Fort, 2013. "Breaking Up Is Hard To Do: Why Firms Fragment Production Across Locations," Working Papers 13-35, Center for Economic Studies, U.S. Census Bureau.
  10. Yücer, Aycil & Siroën, Jean-Marc & GUILHOTO, Joaquim, 2013. "Internal and International Vertical Specialization of Brazilian states– An Input-Output analysis," Economics Papers from University Paris Dauphine 123456789/11720, Paris Dauphine University.
  11. Janet Ceglowski, 2014. "Has Trade Become More Responsive to Income? Assessing the Evidence for US Imports," Open Economies Review, Springer, vol. 25(2), pages 225-241, April.
  12. Rudolfs Bems & Robert C. Johnson & Kei-Mu Yi, 2012. "The Great Trade Collapse," NBER Working Papers 18632, National Bureau of Economic Research, Inc.
  13. Michel, Bernhard, 2013. "Does offshoring contribute to reducing domestic air emissions? Evidence from Belgian manufacturing," Ecological Economics, Elsevier, vol. 95(C), pages 73-82.
  14. Arvind Subramanian & Martin Kessler, 2013. "The Hyperglobalization of Trade and Its Future," Working Paper Series WP13-7, Peterson Institute for International Economics.

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