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Value Added and Factors in Trade: A Comprehensive Approach

Author

Listed:
  • Gaaitzen De Vries
  • Neil Foster-McGregor

    () (The Vienna Institute for International Economic Studies, wiiw)

  • Robert Stehrer

    () (The Vienna Institute for International Economic Studies, wiiw)

Abstract

Based on recent approaches measuring the factor content of trade when intermediates are traded this paper provides an approach to decompose the value added and factor (capital, high, medium and low educated labour) content of trade into foreign and domestic components. This adds to the literature by simultaneously considering both exports and imports allowing a focus on the patterns and changes of net trade and its components and generalizes the commonly applied vertical specialization measures based on exports only. It is further pointed out that a country’s trade balance in terms of value added content equals its trade balance in gross trade. Empirically, results of the proposed decomposition based on the recently compiled World Input-Output Database (WIOD) covering 40 countries and 35 industries over the period 1995-2009 are presented. The domestic value added content of exports tends to decrease over time, increasing again in the crisis. Splitting up by production factors, emerging economies tend to export relatively more capital and import labour in value terms, with the opposite pattern found for advanced economies. Splitting up labour by educational attainment the expected pattern of the advanced countries being relatively stronger net exporters of high-educated labor as compared to low-educated labour in value terms emerges. This provides a distinct view on the structure of trade deficits and surpluses across countries based on its factor content. Finally, it is shown that the role of services is more important than would be suggested by conventional trade statistics due to the value added created in service sectors for production of manufacturing exports.

Suggested Citation

  • Gaaitzen De Vries & Neil Foster-McGregor & Robert Stehrer, 2012. "Value Added and Factors in Trade: A Comprehensive Approach," wiiw Working Papers 80, The Vienna Institute for International Economic Studies, wiiw.
  • Handle: RePEc:wii:wpaper:80
    as

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    File URL: https://wiiw.ac.at/value-added-and-factors-in-trade-a-comprehensive-approach-dlp-2591.pdf
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    References listed on IDEAS

    as
    1. Vladimir Gligorov, 2011. "Models for Stability and Growth, Structural Reforms, Conditionality, and EU Surveillance Criteria," wiiw Research Reports 375, The Vienna Institute for International Economic Studies, wiiw.
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    Citations

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    Cited by:

    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. repec:ilo:ilowps:485511 is not listed on IDEAS
    3. Cali,Massimiliano & Francois,Joseph & Hollweg,Claire Honore & Manchin,Miriam & Oberdabernig,Doris Anita & Rojas Romagosa,Hugo Alexander & Rubinova,Stela & Tomberger,Patrick, 2016. "The labor content of exports database," Policy Research Working Paper Series 7615, The World Bank.
    4. João Amador & Robert Stehrer, 2014. "Portuguese Exports in the Global Value Chains," Economic Bulletin and Financial Stability Report Articles, Banco de Portugal, Economics and Research Department.
    5. Kaplan, Lennart C. & Kohl, Tristan & Martínez-Zarzoso, Inmaculada, 2016. "The effects of the CEECS's accession on sectoral trade: A value added perspective," Center for European, Governance and Economic Development Research Discussion Papers 272, University of Goettingen, Department of Economics.
    6. Meng, Bo & Fang, Yong & Yamano, Norihiko, 2012. "Measuring global value chains and regional economic integration : an international input-output approach," IDE Discussion Papers 362, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    7. Martin Borowiecki & Bernhard Dachs & Doris Hanzl-Weiss & Steffen Kinkel & Johannes Pöschl & Magdolna Sass & Thomas Christian Schmall & Robert Stehrer & Andrea Szalavetz, 2012. "Global Value Chains and the EU Industry," wiiw Research Reports 383, The Vienna Institute for International Economic Studies, wiiw.
    8. Marlies Hanna Schütz & Nicole Palan, 2016. "Restructuring of the international clothing and textile trade network: the role of Italy and Portugal," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 5(1), pages 1-29, December.
    9. Xiao Jiang & William Milberg, 2013. "Capturing the jobs from globalization: trade and employment in global value chains," Brooks World Poverty Institute Working Paper Series ctg-2013-30, BWPI, The University of Manchester.
    10. Marlies Schütz & Nicole Palan, 2015. "Restructuring the International Textile Production and Trade Network. The Role of Italy and Portugal," FIW Working Paper series 156, FIW.
    11. Córcoles, David & Díaz-Mora, Carmen & Gandoy, Rosario, 2014. "Product sophistication: A tie that binds partners in international trade," Economic Modelling, Elsevier, vol. 44(S1), pages 33-41.
    12. João Amador & Rita Cappariello & Robert Stehrer, 2015. "Global Value Chains: A View from the Euro Area," Asian Economic Journal, East Asian Economic Association, vol. 29(2), pages 99-120, June.
    13. Zhi Wang & Shang-Jin Wei & Kunfu Zhu, 2013. "Quantifying International Production Sharing at the Bilateral and Sector Levels," NBER Working Papers 19677, National Bureau of Economic Research, Inc.
    14. João Amador & Sónia Cabral, 2014. "Global Value Chains: Surveying Drivers, Measures and Impacts," Working Papers w201403, Banco de Portugal, Economics and Research Department.

    More about this item

    Keywords

    value added trade; trade in factors; vertical specialization; production net-works; services trade;

    JEL classification:

    • F1 - International Economics - - Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F19 - International Economics - - Trade - - - Other

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