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Trade in Value Added and the Valued Added in Trade

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Listed author(s):
  • Robert Stehrer

    ()

    (The Vienna Institute for International Economic Studies, wiiw)

Abstract

This paper discussed two measures of value added flows between countries ‘Trade in value added’ accounts for value added of one country directly and indirectly embodied in final consumption of another country. ‘Value added in trade’ measures the value added embodied in gross trade flows. The paper shows that both measures result in the same overall net trade of a country which equals its trade balance in gross terms which however does not hold for bilateral relations. These value added flows can further be broken down by various production factors including capital and labour income by educational attainment categories. Using the recently compiled World Input-Output Database (WIOD) selected results comparing the EU-27, the USA, Japan and China based on both concepts regarding value added flows across countries are presented. For example, the US trade deficit with China is reduced by about 25% but would increase with respect to the EU-27 by about 20%. These imbalances are further broken down by factor incomes.

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Paper provided by The Vienna Institute for International Economic Studies, wiiw in its series wiiw Working Papers with number 81.

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Length: 20 pages including 7 Tables and 1 Figure
Date of creation: Jun 2012
Publication status: Published as wiiw Working Paper
Handle: RePEc:wii:wpaper:81
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Keywords: value added trade; factor content of trade; trade integration; vertical specialization; production networks;

Find related papers by JEL classification:

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

This paper has been announced in the following NEP Reports:

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  1. Yuqing Xing & Neal Detert, 2010. "How iPhone Widens the US Trade Deficits with the PRC?," GRIPS Discussion Papers 10-21, National Graduate Institute for Policy Studies.
  2. Timmer,Marcel P. & Inklaar,Robert & O'Mahony,Mary & Ark,Bart van, 2013. "Economic Growth in Europe," Cambridge Books, Cambridge University Press, number 9781107412446, September.
  3. 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.
  4. Umed Temurshoev & Marcel P. Timmer, 2011. "Joint estimation of supply and use tables," Papers in Regional Science, Wiley Blackwell, vol. 90(4), pages 863-882, November.
  5. Trefler, Daniel & Zhu, Susan Chun, 2010. "The structure of factor content predictions," Journal of International Economics, Elsevier, vol. 82(2), pages 195-207, November.
  6. Helpman, Elhanan, 1984. "The Factor Content of Foreign Trade," Economic Journal, Royal Economic Society, vol. 94(373), pages 84-94, March.
  7. Staiger, Robert W., 1986. "Measurement of the factor content of foreign trade with traded intermediate goods," Journal of International Economics, Elsevier, vol. 21(3-4), pages 361-368, November.
  8. 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.
  9. 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.
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Cited by:

  1. Ye, Ming & Meng, Bo & Wei, Shang-jin, 2015. "Measuring smile curves in global value chains," IDE Discussion Papers 530, Institute of Developing Economies, Japan External Trade Organization(JETRO).
  2. Foster-McGregor, Neil & Stehrer, Robert, 2013. "Value added content of trade: A comprehensive approach," Economics Letters, Elsevier, vol. 120(2), pages 354-357.
  3. Roman Stöllinger & Mario Holzner, 2017. "State Aid and Export Competitiveness in the EU," Journal of Industry, Competition and Trade, Springer, vol. 17(2), pages 203-236, June.
  4. Kuboniwa, Masaaki, 2014. "Fundamental Theorem on the Relationship between Trade Balances in Value Added and Gross Terms: Amendment," Discussion Paper Series 600, Institute of Economic Research, Hitotsubashi University.
  5. 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).
  6. Lionel Fontagné & Ann Harrison, 2017. "The Factory-Free Economy: Outsourcing, Servitization and the Future of Industry," NBER Working Papers 23016, National Bureau of Economic Research, Inc.
  7. Suder, Gabriele & Liesch, Peter W. & Inomata, Satoshi & Mihailova, Irina & Meng, Bo, 2015. "The evolving geography of production hubs and regional value chains across East Asia: Trade in value-added," Journal of World Business, Elsevier, vol. 50(3), pages 404-416.
  8. Kuboniwa, Masaaki, 2014. "Bilateral Equivalence between Trade in Value Added and Value Added Content of Trade," Discussion Paper Series 601, Institute of Economic Research, Hitotsubashi University.
  9. 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.
  10. 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.
  11. Roman Stöllinger, 2016. "Structural Change and Global Value Chains in the EU," wiiw Working Papers 127, The Vienna Institute for International Economic Studies, wiiw.
  12. Elizaveta Archanskaia, 2013. "Proximity as a Source of Comparative Advantage," Working Papers hal-01070440, HAL.
  13. Chen, Yenhuang, 2016. "Intra-industry fragmentation: Bilateral value added in electronics exports," Economics Letters, Elsevier, vol. 138(C), pages 22-25.
  14. 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.
  15. Liou, Ruey-Wan & Lin, Hsing-Chun & Chang, Ching-Cheng & Hsu, Shih-Hsun, 2016. "Unveiling the true value of across-strait trade: The global value chain approach," China Economic Review, Elsevier, vol. 41(C), pages 159-180.
  16. Diakantoni, Antonia & Escaith, Hubert, 2012. "Reassessing effective protection rates in a trade in tasks perspective: Evolution of trade policy in "Factory Asia"," MPRA Paper 41723, University Library of Munich, Germany.
  17. Ferraz, Lucas Pedreira do Couto & Gutierre, Leopoldo & Cabral, Rodolfo Arruda, 2015. "The manufacturing industry in Brazil in the era of global value chains," Textos para discussão 402, FGV/EESP - Escola de Economia de São Paulo, Getulio Vargas Foundation (Brazil).
  18. Meng, Bo & Xue, Jinjun & Feng, Kuishuang & Guan, Dabo & Fu, Xue, 2013. "China’s inter-regional spillover of carbon emissions and domestic supply chains," Energy Policy, Elsevier, vol. 61(C), pages 1305-1321.
  19. Enrique Gilles, 2015. "Una medición del valor agregado generado por las exportaciones colombianas," DOCUMENTOS DE TRABAJO EAN 012975, UNIVERSIDAD EAN.
  20. ye, ming, 2016. "Trace the goods and value-added route in exports," MPRA Paper 73476, University Library of Munich, Germany.
  21. Roman Stöllinger, 2016. "Structural change and global value chains in the EU," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(4), pages 801-829, November.
  22. Neil Foster-McGregor & Mario Holzner & Michael Landesmann & Johannes Pöschl & Robert Stehrer & Roman Stöllinger, 2013. "A ‘Manufacturing Imperative’ in the EU – Europe's Position in Global Manufacturing and the Role of Industrial Policy," wiiw Research Reports 391, The Vienna Institute for International Economic Studies, wiiw.

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