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The Value of Value Added

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  • William Powers

Abstract

As production has become more globally integrated, imported components account for a rising share of the value of exports. Many countries may contribute inputs to a good, and the final assembler may capture only a small share of the product’s value. Official trade statistics, which attribute all value to the final exporter, can be uninformative or misleading about a country’s global engagement and its participation in global supply chains. New measures are required that incorporate both production and trade, and track the flow of inputs, and their value, through industries and across national borders. This paper examines the construction and use of value-added measures that incorporate the necessary production and trade data, and evaluates their performance against similar measures based on gross trade. The value-added measures provide a more revealing look into global integration that is consistent across different measures and analytical approaches.

Suggested Citation

  • William Powers, 2012. "The Value of Value Added," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 13(4), pages 19-38, October.
  • Handle: RePEc:wej:wldecn:535
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