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The smile curve: Evolving sources of value added in manufacturing

Author

Listed:
  • Richard Baldwin
  • Tadashi Ito

Abstract

A dramatic disordering of global manufacturing has been seen in recent years. Production processes have fragmented, and many production stages have been offshored to developing nations. Organization of this new global supply chain has evolved into what are often called global value chains (GVCs). Less studied, but no less important, is the shift in the sectoral source of value added in manufactured exports. This phenomenon, often called the “smile curve,” involves a swing in the share of value added in manufactured exports that is generated in the manufacturing sector itself instead of, for example, in the pre‐ and post‐fabrication stages. Our paper presents new evidence quantifying the magnitude of the smile curve notion. Using international input–output databases, we find evidence supporting the smile curve at the aggregate level. Specifically, for almost all exporting sectors and nations, we find that the value added to exports has shifted decisively from the manufacturing sector to service sectors. We also find that developing countries reduced their own‐sourcing service value‐added share, while developed countries maintained their relatively high levels of own‐sourcing service value‐added share. Courbe du sourire : évolution des sources de valeur ajoutée dans le secteur manufacturier. Depuis quelques années, nous observons une réorganisation importante de l'outil industriel mondial. Les processus de production se sont fragmentés, et de nombreuses étapes ont été délocalisées vers des nations en voie de développement. L'organisation de cette nouvelle chaîne logistique mondiale s'est transformée en ce que l'on appelle fréquemment des « chaînes de valeur mondiale ». Un phénomène moins étudié, mais tout aussi important, réside dans la mutation de l'origine sectorielle de la valeur ajoutée des exportations de produits manufacturés. Ce phénomène, souvent appelé « courbe du sourire », résulte d'un glissement de la part de la valeur ajoutée des exportations de produits manufacturés, engendrée par le secteur manufacturier lui‐même, vers les étapes en amont et en aval du processus de production. Notre article présente de nouveaux éléments pour mesurer l'ampleur de cette « courbe du sourire ». D'un point de vue global, et en nous appuyant sur des bases de données entrées‐sorties internationales, nous avons découvert des éléments corroborant la théorie de la courbe du sourire. D'un point de vue plus spécifique, et pour presque tous les secteurs d'exportations de toutes les nations confondues, nous constatons que la valeur ajoutée des exportations s'est très nettement déplacée du secteur manufacturier vers le secteur des services. Nous constatons également qu'en matière de fourniture nationale de services, les pays en voie de développement ont réduit leur part de valeur ajoutée, tandis que les pays développés ont maintenu des niveaux de valeur ajoutée assez élevés.

Suggested Citation

  • Richard Baldwin & Tadashi Ito, 2021. "The smile curve: Evolving sources of value added in manufacturing," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 54(4), pages 1842-1880, November.
    • Handle: RePEc:wly:canjec:v:54:y:2021:i:4:p:1842-1880
    DOI: 10.1111/caje.12555
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    References listed on IDEAS

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