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Measuring trade in value added with Firm-Level Data

Author

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  • Rudolfs Bems

    (International Monetary Fund)

  • Ayumu Ken Kikkawa

    (Sauder School of Business, University of British Columbia)

Abstract

Global Value Chains have proliferated economic policy debates. Yet a key concept – trade in value added –is likely mismeasured because of sectoral aggregation bias stemming from reliance on inputoutput tables. This paper uses comprehensive firm-level data on both domestic and international transactions to study this bias. We find that sectoral aggregation leads to overstated trade in value added and, correspondingly, understated import content of gross exports. The economic magnitude of the estimated bias varies from moderate to large – at 2-5 p.p. of gross exports for Belgium and 17 p.p. for China. We study how the interplay between within-sector heterogeneities in firm import and export intensities and firm size determine the magnitude of the sectoral aggregation bias.

Suggested Citation

  • Rudolfs Bems & Ayumu Ken Kikkawa, 2019. "Measuring trade in value added with Firm-Level Data," Working Paper Research 378, National Bank of Belgium.
  • Handle: RePEc:nbb:reswpp:201911-378
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    References listed on IDEAS

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    Cited by:

    1. Jean Imbs & Laurent L. Pauwels, 2020. "High Order Openness," Working Papers 20200047, New York University Abu Dhabi, Department of Social Science, revised Jun 2020.
    2. Carolina Calatayud & María Engracia Rochina Barrachina, 2023. "How do firms in Sub‐Saharan Africa benefit from global value chains?," South African Journal of Economics, Economic Society of South Africa, vol. 91(2), pages 214-241, June.
    3. A. Giunta & P. Montalbano & S. Nenci, 2022. "Consistency of micro- and macro-level data on global value chains: Evidence from selected European countries," International Economics, CEPII research center, issue 171, pages 130-142.
    4. Biswajit Banerjee & Juraj Zeman, 2022. "Determinants of global value chain participation: cross-country analysis," Indian Economic Review, Springer, vol. 57(1), pages 59-95, June.
    5. Xinheng Liu & Ziyuan Pan & Dongli Fang, 2023. "Agglomeration, resource reallocation and domestic value‐added ratio in exports," Growth and Change, Wiley Blackwell, vol. 54(1), pages 182-213, March.
    6. Antrà s, Pol & Chor, Davin, 2021. "Global Value Chains," CEPR Discussion Papers 15908, C.E.P.R. Discussion Papers.
    7. Laurie S. M. Reijnders & Marcel P. Timmer & Xianjia Ye, 2021. "Labour demand in global value chains: Is there a bias against unskilled work?," The World Economy, Wiley Blackwell, vol. 44(9), pages 2547-2571, September.
    8. Marcel P. Timmer & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2021. "Supply Chain Fragmentation and the Global Trade Elasticity: A New Accounting Framework," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(4), pages 656-680, December.
    9. Nobuaki Yamashita & Doan Thi Thanh Ha, 2022. "Participation in Global Value Chains and Rent Sharing by Small Firms in Viet Nam," Working Papers DP-2021-52, Economic Research Institute for ASEAN and East Asia (ERIA).

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    More about this item

    Keywords

    Global Value Chains; Input-Output tables; Aggregation Bias;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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