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Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research

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  • Robert C. Johnson

Abstract

Due to the rise of global supply chains, gross exports do not accurately measure the amount of value added exchanged between countries. I highlight five facts about differences between gross and value-added exports. These differences are large and growing over time, currently around 25 percent, and manufacturing trade looks more important, relative to services, in gross than value-added terms. These differences are also heterogenous across countries and bilateral partners, and changing unevenly across countries and partners over time. Taking these differences into account enables researchers to obtain better quantitative answers to important macroeconomic and trade questions. I discuss how the facts inform analysis of the transmission of shocks across countries; the mechanics of trade balance adjustments; the impact of frictions on trade; the role of endowments and comparative advantage; and trade policy.

Suggested Citation

  • Robert C. Johnson, 2014. "Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research," Journal of Economic Perspectives, American Economic Association, vol. 28(2), pages 119-142, Spring.
  • Handle: RePEc:aea:jecper:v:28:y:2014:i:2:p:119-42 Note: DOI: 10.1257/jep.28.2.119
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    References listed on IDEAS

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    1. Yong-Seok Choi & Pravin Krishna, 2004. "The Factor Content of Bilateral Trade: An Empirical Test," Journal of Political Economy, University of Chicago Press, pages 887-914.
    2. Guillaume Daudin & Christine Rifflart & Danielle Schweisguth, 2011. "Who produces for whom in the world economy?," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1403-1437, November.
    3. De Backer, Koen & Miroudot, Sébastien, 2014. "Mapping global value chains," Working Paper Series 1677, European Central Bank.
    4. Richard Baldwin & Javier Lopez-Gonzalez, 2015. "Supply-chain Trade: A Portrait of Global Patterns and Several Testable Hypotheses," The World Economy, Wiley Blackwell, pages 1682-1721.
    5. Debeare, Peter, 2003. "Relative Factor Abundance and Trade," Journal of Political Economy, University of Chicago Press, vol. 111(3), pages 589-610, June.
    6. Koen De Backer & Sébastien Miroudot, 2013. "Mapping Global Value Chains," OECD Trade Policy Papers 159, OECD Publishing.
    7. Rudolfs Bems & Robert C. Johnson, 2012. "Value-Added Exchange Rates," NBER Working Papers 18498, National Bureau of Economic Research, Inc.
    8. De Backer, Koen & Miroudot, Sébastien, 2014. "Mapping global value chains," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 37176.
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    More about this item

    JEL classification:

    • F11 - International Economics - - Trade - - - Neoclassical Models of Trade
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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