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Is Domestic Value Addition a Source of Export Sophistication? A Case Study India

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  • Tandon, Anjali

Abstract

An implication of a globally fragmented production system is that countries which assemble and export high-tech products could reflect a sophisticated export structure while generating low domestic value-added component. Therefore, understanding the relationship between domestic value- added component in export, and the export sophistication of a country would be helpful in assessing if the country indeed achieved a quality improvement through indigenous attempts. However, for countries with export competitiveness essentially on grounds of cheap and abundant labour, rather than technological advantage, there is a significant disincentive to invest in innovation and R&D. This could possibly the case for India, motivating the investigation. Results show that exports of sophisticated products, which also belong to the high- technology segment, are paired with low indigenous contribution in the product manufacture. The subscription to imports for exporting high-tech products reflects upon the deficient domestic R&D needed to bolster innovative practices such as product design and engineering. There needs to be a conscious effort to indulge in production stages characterized by high domestic value addition content.

Suggested Citation

  • Tandon, Anjali, 2020. "Is Domestic Value Addition a Source of Export Sophistication? A Case Study India," MPRA Paper 112771, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:112771
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • F1 - International Economics - - Trade
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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