Measuring Small and Medium-Size Enterprises Contribution to Trade in Value Added: The case of Chile 2013-2016

For many years, policymakers in Chile and elsewhere have been struggling to develop exporting-SMEs, aiming at broadening benefits of trade openness and globalization. Progress in this area, however, has been elusive due to the large entry costs to international trade networks. Still, involvement in international trade is not limited to being the direct exporter. Many firms may contribute and benefit from foreign trade as suppliers or contractors of other exporting firms. This can be measured as a firm´s contribution to Trade in Value Added using an Extended Supply and Use Table framework. Following recent empirical work led by the OECD, we show for Chile, using the 2013-2016 sample span, that (a) the total contribution of SMEs to exported value added is 33%, considerably larger than their share as final exporters (21%); (b) the indirect contribution of SMEs more than doubles the direct one; (c) most of the indirect contribution of SMEs to exported value added takes place through large exporting firms, and (d) even after considering the total SMEs contribution, such share is smaller than in most OECD countries and has remained relatively stagnant over time. Yet, since improving on the latter may happen through increasing the SMEs value contribution to other exporters as much as exporting themselves, policymakers should broaden the scope of public policies aimed at this end.