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Indirect Domestic Value Added in Mexico's Manufacturing Exports, by Origin and Destination Sector

Author

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  • Gerardo Fujii-Gambero
  • Rosario Cervantes-Martínez

Abstract

As domestic exports usually require imported inputs, the value of exports differs from the domestic value added contained in exports. The higher the domestic value added contained in exports, the higher the domestic national income created by exports will be. In this case, exports will expand the domestic market. Therefore, exports will push economic growth in two ways: through their direct effect on aggregate demand, and through their effect on the domestic market. For these reasons, the estimate of the magnitude of the domestic value added contained in exports helps explain the capacity of exports to lead economic growth. Domestic exports may be classified as direct and indirect exports. Direct exports are the goods sold to other countries; indirect exports are the domestically produced inputs incorporated in direct exports. The distinction between direct and indirect exports leads to a distinction between direct and indirect domestic value added contained in exports. The income of the factors directly involved in the production of exports constitutes direct domestic value added; the income contained in domestically produced inputs incorporated into exports constitutes the indirect domestic value added. Therefore, the magnitude of indirect value added depends on the density of the domestic intersectorial linkages. The aim of this paper is to present an estimation of the domestic indirect value added contained in Mexico's manufacturing exports in two ways. The first derives from the fact that a direct exporting sector may be the vehicle through which other sectors export in an indirect way; this leads us to estimate the indirect value added contained in exports by sector of origin. The second refers to the destination of this indirect value added--that is, to the direct exporting sectors in which the value added contained in indirect exports of each sector appears. Based on the input-output table for Mexico (National Institute of Statistics and Geography–INEGI 2008), we estimate the domestic value added contained in inputs used to produce Mexican manufacturing exports. We show separately the domestic value added from maquiladora exports and from exports produced by the rest of the manufacturing sector. In order to distinguish the indirect value added in exports by sector of origin and destination of the intermediate inputs, we work with square matrices of indirect domestic value–added multipliers.

Suggested Citation

  • Gerardo Fujii-Gambero & Rosario Cervantes-Martínez, 2013. "Indirect Domestic Value Added in Mexico's Manufacturing Exports, by Origin and Destination Sector," Economics Working Paper Archive wp_760, Levy Economics Institute.
    • Handle: RePEc:lev:wrkpap:wp_760
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    References listed on IDEAS

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    1. Chen, Xikang & Cheng, Leonard K. & Fung, K.C. & Lau, Lawrence J. & Sung, Yun-Wing & Zhu, K. & Yang, C. & Pei, J. & Duan, Y., 2012. "Domestic value added and employment generated by Chinese exports: A quantitative estimation," China Economic Review, Elsevier, vol. 23(4), pages 850-864.
    2. He, Dong & Zhang, Wenlang, 2010. "How dependent is the Chinese economy on exports and in what sense has its growth been export-led?," Journal of Asian Economics, Elsevier, vol. 21(1), pages 87-104, February.
    3. Guillaume Daudin & Christine Rifflart & Danielle Schweisguth, 2011. "Who produces for whom in the world economy?," Canadian Journal of Economics, Canadian Economics Association, vol. 44(4), pages 1403-1437, November.
    4. José Gabriel Palma, 2005. "The seven main "stylized facts" of the Mexican economy since trade liberalization and NAFTA," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 14(6), pages 941-991, December.
    5. 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.
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    Cited by:

    1. Rosario Cervantes-Martínez & Jorge Villaseñor-Becerra & Martín Romero-Morett, 2016. "NAFTA trade (and some extra NAFTA trade) in value added and its distribution, 1995–2011," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-22, December.
    2. Gustavo Adolfo HERNANDEZ DIAZ, 2014. "Especialización Vertical de las Exportaciones Colombianas," Archivos de Economía 11805, Departamento Nacional de Planeación.
    3. Jeffrey Kouton & Sulpice Amonle, 2021. "Global value chains, labor productivity, and inclusive growth in Africa: empirical evidence from heterogeneous panel methods," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 23(1), pages 1-23, June.
    4. World Bank Group, 2016. "Special Economic Zones in the Dominican Republic," World Bank Publications - Reports 26103, The World Bank Group.
    5. Gerardo Fujii-Gambero & Manuel García-Ramos, 2015. "Revisiting the quality of exports," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 4(1), pages 1-17, December.

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    More about this item

    Keywords

    Domestic Value Added in Exports; Indirect Value Added; Indirect Value Added by Sector of Origin; Indirect Value Added by Sector of Destination;
    All these keywords.

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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