a comparative analysis of the gvc position of the economies of the nms

Up or down the value chain?A comparative analysis of the GVC position of the economies of the

NMS

Jan Hagemejer1 & Mahdi Ghodsi2

1NBP & University of Warsaw 2WIIW & UoWFunded by NSC grant no 2013/09/D/HS4/01519

February 27, 2015

Motivation: NMS production shares

Source: WIOD

I NMS maintain a high share of manufacturing in total output...

I ...despite ongoing growth in the service sector

I �The NMS are the backbone of the German manufacturing�

Motivation (2): NMS trade partners shares

Figure: Trade structure

Source: WIOD

I European integration has brought a relative increase of intra-NMStrade...

I ... but the fragmentation and globalization processes have boostedimports and exports from/to China and RoW

I International trade in substitutes or complements (competition vscooperation)?

Motivation (3): NMS production and trade structure

Figure: Imports, exports and output

Figure: Share of intermediates in exports and imports

Questions

I Q: What is the overall position of the NMS in the global value chain(GVC)?

I Q: Do NMS compete with China and other emerging markets or theEU15?

I Q: What is the sectoral composition of output that determines theposition of countries in the GVC?

I A: (Relatively) new data sources

I A: The upstreamness measure - the distance from �nal demand.

I This work is an INPUT to a larger project.

Upstreamness measure (1)

I Antras, Chor, Fally, and Hillberry [2012]: Output of sector is a sumof the �nal and intermediate demand

Yi = Xi+N∑j=1

zijYj

I Substituting recursively:

Yi = Xi+N∑j=1

zijXj+N∑j=1

N∑k=1

zijzjkXj+N∑j=1

N∑k=1

N∑l=1

zijzjkzklXj + · · ·

I Each element corresponds to one production stage. The distancefrom �nal demand is de�ned as a weighted average:

ui = 1· Xi

Yi+2·

N∑j=1

zijXj

Yi+3·

N∑j=1

N∑k=1

zijzjkXj

Yi+4·

N∑j=1

N∑k=1

N∑l=1

zijzjkzklXj

Yi+· · ·

(if only �nal demandui = 1)

Upstreamness measure (2)

I Fally [2011] shows, that: ui = 1+N∑j=1

δijuj

(where δij =zijYj

Yi, and in matrix form: U − ∆U = 1 , whereU to is a

vector N × 1 ui , ∆ is a N × N matrix, where(i , j)-th element is

δij =zijYj

Yi).

I Therefore:U = [I − ∆]−1

1

I Closed economy model (National U): Antras et al. [2012] usenational IO matrices and assume thatδij =

zijYj+EXij−IMij

Yi=

EXij

EXi=

IMij

IMi=

zijYj

Yi.

I Thanks to WIOD we can treat the world as one closed economy(Global U)

World input-output database

I 1435x1435 input-output matrix:

I �nal demand and its sources in each countryI intermediate demand across sectors AND countries for each sector

AND country

I 35 sectors (NACE/CPA)

I 40 countries and RoW (UE, OECD)

National U vs Global U

Figure: Global vs country-level upstreamness

Source: own calculations using WIOD data.

National U vs Global U

ln_res1 ln_res2 ln_res3 ln_res4 ln_res5

High_income 0.0266*** 0.0146***(0.0025) (0.0026)

NMS -0.00481 -0.0223***(0.0027) (0.0029)

EU15 -0.0188*** -0.0309***(0.0025) (0.0026)

China -0.218*** -0.205***(0.0069) (0.0069)

US -0.00804 0.0100(0.0066) (0.0067)

openness 0.0986*** 0.0888*** 0.0987***(0.0056) (0.0059) (0.0062)

constant -0.0366*** -0.00211 -0.0547*** -0.0622*** -0.0329***(0.0022) (0.0018) (0.0024) (0.0028) (0.0026)

N 23056 23056 23056 23056 23056

Global U: ongoing fragmentation and growth ofmanufacturing

Figure: Global and sectoral U. Shares in global output


Manufacturing vs Overall Economies

Figure: Overall U (L) vs U for manufacturing (R)


Imports vs exports

Figure: U weighted by exports and imports


U of imports across sources

Figure: U of imports across sources


Evolution of manufacturing structures

Figure: Evolution of industry shares for NMS


Structure of manufacturing

Table: Structure of NMS manufacturing in 2011

Sector Share in output Share in exports

Leather, Leather and Footwear 0,6% 1,0%

Wood and Products of Wood and Cork 3,0% 2,0%

Textiles and Textile Products 3,0% 4,0%

Manufacturing, Nec; Recycling 3,7% 4,3%

Other Non-Metallic Mineral 4,1% 2,0%

Pulp, Paper, Paper , Printing and Publishing 4,7% 2,6%

Rubber and Plastics 5,5% 5,5%

Chemicals and Chemical Products 6,4% 8,1%

Coke, Re�ned Petroleum and Nuclear Fuel 6,9% 4,4%

Machinery, Nec 7,6% 9,7%

Electrical and Optical Equipment 11,8% 19,0%

Basic Metals and Fabricated Metal 13,2% 11,9%

Transport Equipment 14,0% 18,8%

Food, Beverages and Tobacco 15,4% 6,7%

Source: own calculations using WIOD

Selected sectors (with high output shares)

Across NMS...

Figure: U of the NMS (export-weighted)


The pipeline

I Local vs global U:

I distill EU integration e�ects from world trendsI sectoral composition vs within sector changesI geographical composition vs sectoral compostition.

I U as a determinant of bilateral value added trade �ows

I Upstreamness vs domestic VA in exports - how does the relativeposition in the GVC translate to domestic VA creation?

I Upstreamness vs knowledge spillovers from FDI - do technologyspillovers depend on the distance from �nal demand?

Bibliography

Pol Antras, Davin Chor, Thibault Fally, and Russell Hillberry. Measuringthe Upstreamness of Production and Trade Flows. American Economic

Review, 102(3):412�16, May 2012.

Thibault Fally. On the fragmentation of production in the us. Universityof Colorado mimeo, 2011.

a comparative analysis of the gvc position of the economies of the nms

Economy & Finance