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Application of factor decomposition techniques to vertical specialisation measurements

Author

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  • Meng, Bo
  • Yamano, Norihiko
  • Webb, Colin

Abstract

The increasing importance of vertical specialisation (VS) trade has been a notable feature of rapid economic globalisation and regional integration. In an attempt to understand countries’ depth of participation in global production chains, many Input-Output based VS indicators have been developed. However, most of them focus on showing the overall magnitude of a country’s VS trade, rather than explaining the roles that specific sectors or products play in VS trade and what factors make the VS change over time. Changes in vertical specialisation indicators are, in fact, determined by mixed and complex factors such as import substitution ratios, types of exported goods and domestic production networks. In this paper, decomposition techniques are applied to VS measurement based on the OECD Input-Output database. The decomposition results not only help us understand the structure of VS at detailed sector and product levels, but also show us the contributions of trade dependency, industrial structures of foreign trade and domestic production system to a country’s vertical specialisation trade.

Suggested Citation

  • Meng, Bo & Yamano, Norihiko & Webb, Colin, 2011. "Application of factor decomposition techniques to vertical specialisation measurements," IDE Discussion Papers 276, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  • Handle: RePEc:jet:dpaper:dpaper276
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    File URL: https://ir.ide.go.jp/?action=repository_action_common_download&item_id=37896&item_no=1&attribute_id=22&file_no=1
    File Function: First version, 2011
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    References listed on IDEAS

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    1. Norihiko Yamano & Bo Meng & Kiichiro Fukasaku, 2011. "Fragmentation and Changes in the Asian Trade Network," Working Papers PB-2011-01, Economic Research Institute for ASEAN and East Asia (ERIA).
    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. Daisuke Hiratsuka & Yoko Uchida, 2010. "The Development of Input Trade and Production Networks in East Asia," Chapters,in: Input Trade and Production Networks in East Asia, chapter 1 Edward Elgar Publishing.
    4. Kei-Mu Yi, 2003. "Can Vertical Specialization Explain the Growth of World Trade?," Journal of Political Economy, University of Chicago Press, vol. 111(1), pages 52-102, February.
    5. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Meng, Bo & Fang, Yong & Yamano, Norihiko, 2012. "Measuring global value chains and regional economic integration : an international input-output approach," IDE Discussion Papers 362, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    2. Suder, Gabriele & Liesch, Peter W. & Inomata, Satoshi & Mihailova, Irina & Meng, Bo, 2015. "The evolving geography of production hubs and regional value chains across East Asia: Trade in value-added," Journal of World Business, Elsevier, vol. 50(3), pages 404-416.
    3. Bullón, David & Mena, Tayutic & Meng, Bo & Sánchez, Natalia & Vargas, Henry & Inomata, Satoshi, 2015. "Using the input-output approach to measure participation in GVCs : the case of Costa Rica," IDE Discussion Papers 529, Institute of Developing Economies, Japan External Trade Organization(JETRO).

    More about this item

    Keywords

    Developing countries; Developed countries; International trade; Input-output tables; Vertical specialisation; Factor decomposition; Input-output;

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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