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Estimating domestic content in exports when processing trade is pervasive

  • Koopman, Robert
  • Wang, Zhi
  • Wei, Shang-Jin

For many questions, it is crucial to know the extent of domestic value added (DVA) in a country's exports, but the computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By applying our framework to Chinese data, we estimate that the share of domestic content in its manufactured exports was about 50% before China's WTO membership, and has risen to nearly 60% since then. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly low domestic content (about 30% or less).

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 99 (2012)
Issue (Month): 1 ()
Pages: 178-189

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Handle: RePEc:eee:deveco:v:99:y:2012:i:1:p:178-189
Contact details of provider: Web page: http://www.elsevier.com/locate/devec

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  1. Kei-Mu Yi, 2000. "Can vertical specialization explain the growth of world trade?," Staff Reports 96, Federal Reserve Bank of New York.
  2. 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.
  3. Hummels, David & Ishii, Jun & Yi, Kei-Mu, 2001. "The nature and growth of vertical specialization in world trade," Journal of International Economics, Elsevier, vol. 54(1), pages 75-96, June.
  4. Rodrik, Dani, 2006. "What's So Special about China's Exports?," Working Paper Series rwp06-001, Harvard University, John F. Kennedy School of Government.
  5. Peter K. Schott, 2006. "The Relative Sophistication of Chinese Exports," NBER Working Papers 12173, National Bureau of Economic Research, Inc.
  6. Paul R. Krugman, 2008. "Trade and Wages, Reconsidered," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(1 (Spring), pages 103-154.
  7. Zhi Wang & Shang-Jin Wei, 2010. "What Accounts for the Rising Sophistication of China's Exports?," NBER Chapters, in: China's Growing Role in World Trade, pages 63-104 National Bureau of Economic Research, Inc.
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