IDEAS home Printed from https://ideas.repec.org/p/pas/papers/2019-03.html
   My bibliography  Save this paper

Measuring trade in value added: How valid is the proportionality assumption?

Author

Listed:
  • Arianto Patunru
  • Prema-chandra Athukorala

Abstract

The validity of the ‘proportionality assumption’ made in estimating value added in exports using aggregate input-output tables is tested using separately compiled domestic- and imported-input matrices for Indonesia, Thailand, Malaysia, Taiwan, and Australia. The results show that the use of the proportionality assumption results in overestimation of value-added exports, and that the magnitude of the bias becomes amplified when the export composition of a country shifts from primary products to manufactured goods through integration into global production networks.

Suggested Citation

  • Arianto Patunru & Prema-chandra Athukorala, 2019. "Measuring trade in value added: How valid is the proportionality assumption?," Departmental Working Papers 2019-03, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2019-03
    as

    Download full text from publisher

    File URL: https://acde.crawford.anu.edu.au/sites/default/files/publication/acde_crawford_anu_edu_au/2019-03/acde_td_wp_2019_3_patunru_and_athulorala.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Robert Koopman & Zhi Wang & Shang-Jin Wei, 2014. "Tracing Value-Added and Double Counting in Gross Exports," American Economic Review, American Economic Association, vol. 104(2), pages 459-494, February.
    2. Deborah Winkler & William Milberg, 2012. "Bias in the ‘Proportionality Assumption’ Used in the Measurement of Offshoring," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 13(4), pages 39-60, October.
    3. Hiau Looi Kee & Heiwai Tang, 2016. "Domestic Value Added in Exports: Theory and Firm Evidence from China," American Economic Review, American Economic Association, vol. 106(6), pages 1402-1436, June.
    4. Robert C. Johnson & Guillermo Noguera, 2017. "A Portrait of Trade in Value-Added over Four Decades," The Review of Economics and Statistics, MIT Press, vol. 99(5), pages 896-911, December.
    5. Johnson, Robert C. & Noguera, Guillermo, 2012. "Accounting for intermediates: Production sharing and trade in value added," Journal of International Economics, Elsevier, vol. 86(2), pages 224-236.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Ling-Yun He & Hui Huang, 2021. "Economic Benefits and Pollutants Emission Embodied in China–US Merchandise Trade—Comparative Analysis Based on Gross Trade, Value Added Trade and Value Added in Trade," Sustainability, MDPI, vol. 13(20), pages 1-20, October.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michael Sposi & Kei-Mu Yi & Jing Zhang, 2021. "Trade Integration, Global Value Chains, and Capital Accumulation," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 69(3), pages 505-539, September.
    2. Aichele, Rahel & Heiland, Inga, 2018. "Where is the value added? Trade liberalization and production networks," Journal of International Economics, Elsevier, vol. 115(C), pages 130-144.
    3. Marcel P Timmer & Sébastien Miroudot & Gaaitzen J de Vries, 2019. "Functional specialisation in trade," Journal of Economic Geography, Oxford University Press, vol. 19(1), pages 1-30.
    4. Pol Antràs & Davin Chor, 2021. "Global Value Chains," NBER Working Papers 28549, National Bureau of Economic Research, Inc.
    5. Tang, Heiwai & Zeng, Douglas Zhihua & Zeufack, Albert G., 2020. "Assessing Asia - Sub-Saharan Africa global value chain linkages," Kiel Working Papers 2159, Kiel Institute for the World Economy (IfW Kiel).
    6. Stefan Pahl & Marcel P. Timmer, 2019. "Patterns of vertical specialisation in trade: long-run evidence for 91 countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 155(3), pages 459-486, August.
    7. Haoliang Zhu, 2019. "A quantitative analysis of global value chains: why has domestic value-added of China’s exports increased?," International Journal of Economic Policy Studies, Springer, vol. 13(2), pages 403-423, August.
    8. repec:gdk:wpaper:51 is not listed on IDEAS
    9. Paola Conconi & Manuel García-Santana & Laura Puccio & Roberto Venturini, 2018. "From Final Goods to Inputs: The Protectionist Effect of Rules of Origin," American Economic Review, American Economic Association, vol. 108(8), pages 2335-2365, August.
    10. Inaki Arto & Erik Dietzenbacher & Jose Manuel Rueda-Cantuche, 2019. "Measuring bilateral trade in terms of value added," JRC Research Reports JRC116694, Joint Research Centre.
    11. Chen, Quanrun & Chen, Xikang & Pei, Jiansuo & Yang, Cuihong & Zhu, Kunfu, 2020. "Estimating domestic content in China’s exports: Accounting for a dual-trade regime," Economic Modelling, Elsevier, vol. 89(C), pages 43-54.
    12. Chen, Xiaoping & Lu, Yi & Zhu, Lianming, 2017. "Product cycle, contractibility, and global sourcing," Journal of Development Economics, Elsevier, vol. 127(C), pages 283-296.
    13. Arne J. Nagengast & Robert Stehrer, 2016. "The Great Collapse in Value Added Trade," Review of International Economics, Wiley Blackwell, vol. 24(2), pages 392-421, May.
    14. Shen, Leilei & Silva, Peri, 2018. "Value-added exports and U.S. local labor markets: Does China really matter?," European Economic Review, Elsevier, vol. 101(C), pages 479-504.
    15. Bhushan Praveen Jangam & Badri Narayan Rath, 2020. "Cross-country convergence in global value chains: Evidence from club convergence analysis," International Economics, CEPII research center, issue 163, pages 134-146.
    16. LAI, Edwin L.-C. & QI, Han (Steffan), 2018. "Fragmentation and Gains from Trade," Discussion paper series HIAS-E-76, Hitotsubashi Institute for Advanced Study, Hitotsubashi University.
    17. Chor, Davin & Manova, Kalina & Yu, Zhihong, 2021. "Growing like China: Firm performance and global production line position," Journal of International Economics, Elsevier, vol. 130(C).
    18. Marilia Marcato & Carolina Baltar & Fernando Sarti, 2019. "International competitiveness in a vertically fragmented production structure: empirical challenges and evidence," Economics Bulletin, AccessEcon, vol. 39(2), pages 876-893.
    19. Ya Liu & Yuhuan Zhao & Hao Li & Song Wang & Yongfeng Zhang & Ye Cao, 2018. "Economic Benefits and Environmental Costs of China's Exports: A Comparison with the USA Based on Network Analysis," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 26(4), pages 106-132, July.
    20. Biswajit Banerjee & Juraj Zeman, 2020. "Determinants of Global Value Chain Participation: Cross-country Analysis," Working and Discussion Papers WP 1/2020, Research Department, National Bank of Slovakia.
    21. Carlo Altomonte & Laura Bonacorsi & Italo Colantobe, 2018. "Trade and Growth in the Age of Global Value Chains," BAFFI CAREFIN Working Papers 1897, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

    More about this item

    Keywords

    trade in value-added; global production networks; input-output analysis;
    All these keywords.

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pas:papers:2019-03. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prema-chandra Athukorala (email available below). General contact details of provider: https://edirc.repec.org/data/asanuau.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.