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Endogenizing Capital in Measuring Trade in Value-Added This paper addresses a critical methodological gap in measuring trade in value added (TiVA) using conventional inter-country input–output (ICIO) models, in which capital is predominantly treated as an exogenous Abstract: component of final demand. By applying both augmentation and flow-matrix approaches to endogenize capital within ICIO models, we develop new indicators that capture domestic and foreign capital value added embodied in exports, as well as countries’ capital dependence. Our empirical analysis, based on OECD ICIO tables and newly constructed capital-flow matrices, shows that conventional TiVA metrics substantially underestimate the degree of developed economies’ participation and comparative advantages in GVCs, particularly those specializing in the production of capital goods and services. The capital-endogenized approach provides important insights into countries’ export competitiveness and capital dependency, thereby offering a more comprehensive understanding of GVCs and international trade patterns, with implications for technological dependence, supply-chain resilience, and industrial policy

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  • YE,Ming
  • MIROUDOT,Sébastien
  • MENG,Bo

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  • YE,Ming & MIROUDOT,Sébastien & MENG,Bo, 2025. "Endogenizing Capital in Measuring Trade in Value-Added This paper addresses a critical methodological gap in measuring trade in value added (TiVA) using conventional inter-country input–output (ICIO) models, in which capital is predominantly treated ," IDE Discussion Papers 982, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper982
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    References listed on IDEAS

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    1. 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.
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    JEL classification:

    • F6 - International Economics - - Economic Impacts of Globalization
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F15 - International Economics - - Trade - - - Economic Integration
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis

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