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Extraction-cum-substitution: A KISS approach to mapping the impacts of bilateral trade conflicts


  • Escaith, Hubert


This paper presents a simple yet powerful methodological tool for analysing the impact of a bilateral trade conflict on third countries when trade includes intermediate inputs. Mixing input-output modelling with recent development of trade in value-added analysis, the extraction-cum-substitution approach maps and measures the sectoral and global interactions in global value chains.It can also be used to generate “in silico” a large data set of numerical “observations” that can be further analysed using appropriate exploratory statistical techniques. The paper counts with three parts, besides introduction and conclusion. The first one is theoretical, starting with a formal model of inter-industry trade before describing the empirical application to input-output analysis. The second part is didactic, illustrating the method on a small six-countries/three-industries model.The third part applies the methodology to the bilateral trade conflict that arose between China and the USA in 2018. This section shows also how the method can also be used for generating analytical data and identify modes of insertion in the global economy. The program, written in open-source R language, is shown in annex.

Suggested Citation

  • Escaith, Hubert, 2019. "Extraction-cum-substitution: A KISS approach to mapping the impacts of bilateral trade conflicts," MPRA Paper 95162, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:95162

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    References listed on IDEAS

    1. James E. Anderson & Eric van Wincoop, 2003. "Gravity with Gravitas: A Solution to the Border Puzzle," American Economic Review, American Economic Association, vol. 93(1), pages 170-192, March.
    2. 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.
    3. Harry G. Johnson, 1953. "Optimum Tariffs and Retaliation," Review of Economic Studies, Oxford University Press, vol. 21(2), pages 142-153.
    4. Maarten Bosker & Bastian Westbrock, 2019. "The network origins of the gains from trade," CESifo Working Paper Series 7552, CESifo Group Munich.
    5. Marcel P. Timmer & Erik Dietzenbacher & Bart Los & Robert Stehrer & Gaaitzen J. Vries, 2015. "An Illustrated User Guide to the World Input–Output Database: the Case of Global Automotive Production," Review of International Economics, Wiley Blackwell, vol. 23(3), pages 575-605, August.
    6. Jan Oosterhaven & Maaike C. Bouwmeester, 2016. "A New Approach To Modeling The Impact Of Disruptive Events," Journal of Regional Science, Wiley Blackwell, vol. 56(4), pages 583-595, September.
    7. Bastiaan Quast & Victor Kummritz, 2015. "Decompr: Global Value Chain Decomposition In R," CTEI Working Papers series 01-2015, Centre for Trade and Economic Integration, The Graduate Institute.
    8. Walter Isard & Merton J. Peck, 1954. "Location Theory and International and Interregional Trade Theory," The Quarterly Journal of Economics, Oxford University Press, vol. 68(1), pages 97-114.
    9. 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.
    10. repec:spo:wpecon:info:hdl:2441/5l6uh8ogmqildh09h4dj9499g is not listed on IDEAS
    11. Bosker, Maarten & Westbrock, Bastian, 2018. "The network origins of the gains from trade," CEPR Discussion Papers 13285, C.E.P.R. Discussion Papers.
    12. Bart Los & Marcel P. Timmer, 2020. "Measuring Bilateral Exports of Value Added: A Unified Framework," NBER Chapters, in: The Challenges of Globalization in the Measurement of National Accounts, National Bureau of Economic Research, Inc.
    13. Robert Koopman & William Powers & Zhi Wang & Shang-Jin Wei, 2010. "Give Credit Where Credit Is Due: Tracing Value Added in Global Production Chains," NBER Working Papers 16426, National Bureau of Economic Research, Inc.
    14. Erik Dietzenbacher & Michael L. Lahr, 2013. "Expanding Extractions," Economic Systems Research, Taylor & Francis Journals, vol. 25(3), pages 341-360, September.
    15. Erik Dietzenbacher & Ronald E. Miller, 2009. "Ras‐Ing The Transactions Or The Coefficients: It Makes No Difference," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 555-566, August.
    16. Walter Isard, 1954. "Location Theory and Trade Theory: Short-Run Analysis," The Quarterly Journal of Economics, Oxford University Press, vol. 68(2), pages 305-320.
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    More about this item


    input-output analysis; international production networks; China-USA trade conflict; exploratory data analysis;

    JEL classification:

    • C67 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Input-Output Models
    • D57 - Microeconomics - - General Equilibrium and Disequilibrium - - - Input-Output Tables and Analysis
    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F60 - International Economics - - Economic Impacts of Globalization - - - General

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