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Trade, Value Added, and Productivity Linkages: A Qualitative Analysis

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  • François de Soyres
  • Alexandre Gaillard

Abstract

Traditional international real business cycle (IRBC) models produce a weak relationship between trade and cross-country real GDP (RGDP) correlations (corrRGDP), contradicting empirical findings. We reassess this quantitative puzzle in a many-country model featuring (i) global value chains, (ii) monopolistic competition, (iii) fluctuations in the number of varieties, and (iv) RGDP measurement using double deflation. In this framework, fluctuations in imported inputs cause profit and efficiency variations, reflected in measured GDP and productivity fluctuations. Using actual variations in trade linkages, the model replicates 70 percent of observed bilateral trade linkages to corrRGDP slope and 60 percent of productivity correlation slope.

Suggested Citation

  • François de Soyres & Alexandre Gaillard, 2026. "Trade, Value Added, and Productivity Linkages: A Qualitative Analysis," American Economic Journal: Macroeconomics, American Economic Association, vol. 18(1), pages 149-186, January.
    • Handle: RePEc:aea:aejmac:v:18:y:2026:i:1:p:149-86
    DOI: 10.1257/mac.20210192
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    References listed on IDEAS

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    1. Robert C. Johnson & Guillermo Noguera, 2017. "A Portrait of Trade in Value-Added over Four Decades," The Review of Economics and Statistics, MIT Press, vol. 99(5), pages 896-911, December.
    2. Timothy J. Kehoe & Kim J. Ruhl, 2008. "Are Shocks to the Terms of Trade Shocks to Productivity?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 804-819, October.
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    More about this item

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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