follow the value added flows in gvcs: measurement issues ... · motivation and contributionsnew...
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Motivation and contributions New methods New tools
Follow the Value Added flows in GVCs:measurement issues and solutions
Federico Belotti1 Alessandro Borin2 Michele Mancini2
1Tor Vergata 2Bank of Italy
Roma Tre University22-23 March 2018
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 1 / 33
Motivation and contributions New methods New tools
International fragmentation of production
Since ICT revolution and globalization: traditional trade statistics do notprovide an adequate representation of supply and demand linkagesamong the economies anymore.
Countries export foreign productsDestinations of exports do not coincide with final markets
Need new macro data, new methods and new tools for a full evaluationof a country’s exposure to global demand
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 2 / 33
Motivation and contributions New methods New tools
International fragmentation of production
Since ICT revolution and globalization: traditional trade statistics do notprovide an adequate representation of supply and demand linkagesamong the economies anymore.
Countries export foreign products
Destinations of exports do not coincide with final markets
Need new macro data, new methods and new tools for a full evaluationof a country’s exposure to global demand
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 2 / 33
Motivation and contributions New methods New tools
International fragmentation of production
Since ICT revolution and globalization: traditional trade statistics do notprovide an adequate representation of supply and demand linkagesamong the economies anymore.
Countries export foreign productsDestinations of exports do not coincide with final markets
Need new macro data, new methods and new tools for a full evaluationof a country’s exposure to global demand
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 2 / 33
Motivation and contributions New methods New tools
International fragmentation of production
Since ICT revolution and globalization: traditional trade statistics do notprovide an adequate representation of supply and demand linkagesamong the economies anymore.
Countries export foreign productsDestinations of exports do not coincide with final markets
Need new macro data, new methods and new tools for a full evaluationof a country’s exposure to global demand
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 2 / 33
Motivation and contributions New methods New tools
Contributions
Main contributions of our works:1 A better understanding of trade in GVCs:
a bilateral/sectoral decomposition of trade.different refinements of aggregate decompositions of exports.
2 icio: a Stata command for the analysis of Inter-CountryInput-Output tables
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 3 / 33
Motivation and contributions New methods New tools
This presentation
Borin, A. and M. Mancini, 2017a. ‘Follow the Value Added:Tracking Bilateral Relations in Global Value Chains’, MPRAWorking Paper No. 82692. Link .Previous version, 2015 Link
Borin, A. and M. Mancini, 2017b. ‘Participation in Global ValueChains: measurement issues and the place of Italy’, Rivista diPolitica Economica VII-IX. Link
Borin, A., Belotti F. and M. Mancini, 2018. ‘icio: a Statacommand for the analysis of Inter-Country Input-Output tables ’,mimeo. Link
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 4 / 33
Motivation and contributions New methods New tools
New methods
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 5 / 33
Motivation and contributions New methods New tools
New methods: trade in value-added
First works (Hummels, Ishii and Yi, 2001; Johnson and Noguera, 2012):domestic and foreign content of exports: don’t know the final market
VA shares in final demand (VAX): don’t know the exporting country
Decomposition of aggregate exports (Koopman, Wang and Wei, 2014)
Goal: trace the value-added from the origin to the final destinationProblems: some imprecisions; cannot accomplish this result, needthe bilateral dimension
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 6 / 33
Motivation and contributions New methods New tools
New methods: trade in value-added
First works (Hummels, Ishii and Yi, 2001; Johnson and Noguera, 2012):domestic and foreign content of exports: don’t know the final marketVA shares in final demand (VAX): don’t know the exporting country
Decomposition of aggregate exports (Koopman, Wang and Wei, 2014)
Goal: trace the value-added from the origin to the final destinationProblems: some imprecisions; cannot accomplish this result, needthe bilateral dimension
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 6 / 33
Motivation and contributions New methods New tools
New methods: trade in value-added
First works (Hummels, Ishii and Yi, 2001; Johnson and Noguera, 2012):domestic and foreign content of exports: don’t know the final marketVA shares in final demand (VAX): don’t know the exporting country
Decomposition of aggregate exports (Koopman, Wang and Wei, 2014)Goal: trace the value-added from the origin to the final destination
Problems: some imprecisions; cannot accomplish this result, needthe bilateral dimension
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 6 / 33
Motivation and contributions New methods New tools
New methods: trade in value-added
First works (Hummels, Ishii and Yi, 2001; Johnson and Noguera, 2012):domestic and foreign content of exports: don’t know the final marketVA shares in final demand (VAX): don’t know the exporting country
Decomposition of aggregate exports (Koopman, Wang and Wei, 2014)Goal: trace the value-added from the origin to the final destinationProblems: some imprecisions; cannot accomplish this result, needthe bilateral dimension
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 6 / 33
Motivation and contributions New methods New tools
New methods: bilateral decomposition
From aggregate to bilateral (and sectoral) decomposition of trade flows.
Why a bilateral decomposition?
CVA=1
BVA=1
AVA=1 Y=3
3 1
2C
VA=1B
VA=1
AVA=1 Y=3
1
1
3
Same VA, same final destination, different positionsAggregate decomposition cannot distinguish between this twostructures
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 7 / 33
Motivation and contributions New methods New tools
New methods: bilateral decomposition
From aggregate to bilateral (and sectoral) decomposition of trade flows.
Why a bilateral decomposition?
CVA=1
BVA=1
AVA=1 Y=3
3 1
2C
VA=1B
VA=1
AVA=1 Y=3
1
1
3
Same VA, same final destination, different positionsAggregate decomposition cannot distinguish between this twostructures
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 7 / 33
Motivation and contributions New methods New tools
New methods: bilateral decomposition
From aggregate to bilateral (and sectoral) decomposition of trade flows.
Why a bilateral decomposition?
CVA=1
BVA=1
AVA=1 Y=3
3 1
2
CVA=1
BVA=1
AVA=1 Y=3
1
1
3
Same VA, same final destination, different positionsAggregate decomposition cannot distinguish between this twostructures
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 7 / 33
Motivation and contributions New methods New tools
New methods: bilateral decomposition
From aggregate to bilateral (and sectoral) decomposition of trade flows.
Why a bilateral decomposition?
CVA=1
BVA=1
AVA=1 Y=3
3 1
2C
VA=1B
VA=1
AVA=1 Y=3
1
1
3
Same VA, same final destination, different positionsAggregate decomposition cannot distinguish between this twostructures
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 7 / 33
Motivation and contributions New methods New tools
New methods: bilateral decomposition
From aggregate to bilateral (and sectoral) decomposition of trade flows.
Why a bilateral decomposition?
CVA=1
BVA=1
AVA=1 Y=3
3 1
2C
VA=1B
VA=1
AVA=1 Y=3
1
1
3
Same VA, same final destination, different positions
Aggregate decomposition cannot distinguish between this twostructures
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 7 / 33
Motivation and contributions New methods New tools
New methods: bilateral decomposition
From aggregate to bilateral (and sectoral) decomposition of trade flows.
Why a bilateral decomposition?
CVA=1
BVA=1
AVA=1 Y=3
3 1
2C
VA=1B
VA=1
AVA=1 Y=3
1
1
3
Same VA, same final destination, different positionsAggregate decomposition cannot distinguish between this twostructures
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 7 / 33
Motivation and contributions New methods New tools
Bilateral decomposition (BM, 2017a): a scheme
Exporter (and origin of domestic VA)
Direct ImporterBILATERAL FLOW
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 8 / 33
Motivation and contributions New methods New tools
Bilateral decomposition (BM, 2017a): a scheme
Country of origin of foreign VA
Exporter (and origin of domestic VA)
Direct ImporterBILATERAL FLOW
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 8 / 33
Motivation and contributions New methods New tools
Bilateral decomposition (BM, 2017a): a scheme
Country of origin of foreign VA
Exporter (and origin of domestic VA)
Direct ImporterBILATERAL FLOW
Destination of re‐export
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 8 / 33
Motivation and contributions New methods New tools
Bilateral decomposition (BM, 2017a): a scheme
Country of origin of foreign VA
Exporter (and origin of domestic VA)
Direct ImporterBILATERAL FLOW
Destination of re‐exportOther
possible stages of production
Country of completion of final products
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 8 / 33
Motivation and contributions New methods New tools
Bilateral decomposition (BM, 2017a): a scheme
Country of origin of foreign VA
Exporter (and origin of domestic VA)
Direct ImporterBILATERAL FLOW
Destination of re‐exportOther
possible stages of production
Country of completion of final products
Destination market
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 8 / 33
Motivation and contributions New methods New tools
Bilateral decomposition (BM, 2017a): a scheme
Country of origin of foreign VA
Exporter (and origin of domestic VA)
Direct ImporterBILATERAL FLOW
Destination of re‐exportOther
possible stages of production
Country of completion of final products
Destination market
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 8 / 33
Motivation and contributions New methods New tools
Bilateral decomposition (BM, 2017a): a scheme
Country of origin of foreign VA
Exporter (and origin of domestic VA)
Direct ImporterBILATERAL FLOW
Destination of re‐exportOther
possible stages of production
Country of completion of final products
Destination market
Sector of origin Sector of
export
Sector of destination
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 8 / 33
Motivation and contributions New methods New tools
Decomposition of aggregate exports: warning
KWW decomposition is incorrect in two aspects:DVA absorbed by direct importer and third countries More
FVA and foreign double counting More
(Moreover, domestic and foreign double counting definition isinconsistent More )
Exploiting our bilateral decomposition to correct the aggregate one.Decomposing Italian exports:
DVA absorbed by direct partner overstated by KWW (63.6% vs56.5% of Italian exports).FVA slightly understated by KWW (18.9% vs 19.4% of Italianexports).
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 9 / 33
Motivation and contributions New methods New tools
Decomposition of aggregate exports: warning
KWW decomposition is incorrect in two aspects:DVA absorbed by direct importer and third countries More
FVA and foreign double counting More
(Moreover, domestic and foreign double counting definition isinconsistent More )
Exploiting our bilateral decomposition to correct the aggregate one.Decomposing Italian exports:
DVA absorbed by direct partner overstated by KWW (63.6% vs56.5% of Italian exports).FVA slightly understated by KWW (18.9% vs 19.4% of Italianexports).
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 9 / 33
Motivation and contributions New methods New tools
Decomposition of aggregate exports: warning
KWW decomposition is incorrect in two aspects:DVA absorbed by direct importer and third countries More
FVA and foreign double counting More
(Moreover, domestic and foreign double counting definition isinconsistent More )
Exploiting our bilateral decomposition to correct the aggregate one.Decomposing Italian exports:
DVA absorbed by direct partner overstated by KWW (63.6% vs56.5% of Italian exports).FVA slightly understated by KWW (18.9% vs 19.4% of Italianexports).
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 9 / 33
Motivation and contributions New methods New tools
Decomposition of aggregate exports: warning
KWW decomposition is incorrect in two aspects:DVA absorbed by direct importer and third countries More
FVA and foreign double counting More
(Moreover, domestic and foreign double counting definition isinconsistent More )
Exploiting our bilateral decomposition to correct the aggregate one.Decomposing Italian exports:
DVA absorbed by direct partner overstated by KWW (63.6% vs56.5% of Italian exports).
FVA slightly understated by KWW (18.9% vs 19.4% of Italianexports).
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 9 / 33
Motivation and contributions New methods New tools
Decomposition of aggregate exports: warning
KWW decomposition is incorrect in two aspects:DVA absorbed by direct importer and third countries More
FVA and foreign double counting More
(Moreover, domestic and foreign double counting definition isinconsistent More )
Exploiting our bilateral decomposition to correct the aggregate one.Decomposing Italian exports:
DVA absorbed by direct partner overstated by KWW (63.6% vs56.5% of Italian exports).FVA slightly understated by KWW (18.9% vs 19.4% of Italianexports).
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 9 / 33
Motivation and contributions New methods New tools
GVC-related trade in aggregate exports
What is GVC-related trade? In the spirit of Hummels et al., 2001:“Goods and services crossing more than one border”Need a (ad-hoc) bilateral decomposition.
GVC-related trade much higher than standard figures:
Standard measure of participation in GVCs derived from KWW: 36%of Italian aggregate exports.Exploiting a bilateral decomposition: 44% of Italian aggregateexports related to GVC.
Intuition: wedge driven by the correct measurement of traditional trade,possible just with the right bilateral decomposition.
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 10 / 33
Motivation and contributions New methods New tools
GVC-related trade in aggregate exports
What is GVC-related trade? In the spirit of Hummels et al., 2001:“Goods and services crossing more than one border”Need a (ad-hoc) bilateral decomposition.
GVC-related trade much higher than standard figures:Standard measure of participation in GVCs derived from KWW: 36%of Italian aggregate exports.
Exploiting a bilateral decomposition: 44% of Italian aggregateexports related to GVC.
Intuition: wedge driven by the correct measurement of traditional trade,possible just with the right bilateral decomposition.
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 10 / 33
Motivation and contributions New methods New tools
GVC-related trade in aggregate exports
What is GVC-related trade? In the spirit of Hummels et al., 2001:“Goods and services crossing more than one border”Need a (ad-hoc) bilateral decomposition.
GVC-related trade much higher than standard figures:Standard measure of participation in GVCs derived from KWW: 36%of Italian aggregate exports.Exploiting a bilateral decomposition: 44% of Italian aggregateexports related to GVC.
Intuition: wedge driven by the correct measurement of traditional trade,possible just with the right bilateral decomposition.
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 10 / 33
Motivation and contributions New methods New tools
GVC-related trade in aggregate exports
What is GVC-related trade? In the spirit of Hummels et al., 2001:“Goods and services crossing more than one border”Need a (ad-hoc) bilateral decomposition.
GVC-related trade much higher than standard figures:Standard measure of participation in GVCs derived from KWW: 36%of Italian aggregate exports.Exploiting a bilateral decomposition: 44% of Italian aggregateexports related to GVC.
Intuition: wedge driven by the correct measurement of traditional trade,possible just with the right bilateral decomposition.
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 10 / 33
Motivation and contributions New methods New tools
Other bilateral decompositions: shortcomings
Wang, Wei and Zhu (2013):Cannot measure GVC-related trade (see Wang et al. 2017).Same imprecisions in the foreign VA accounting as in KWW.Inconsistent framework.Only sector of export.
Nagengast and Stehrer (2016):
Incorrect VA absorbed by direct importer.Imprecise double-counting.Lack of sectoral decomposition.
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Motivation and contributions New methods New tools
Other bilateral decompositions: shortcomings
Wang, Wei and Zhu (2013):Cannot measure GVC-related trade (see Wang et al. 2017).Same imprecisions in the foreign VA accounting as in KWW.Inconsistent framework.Only sector of export.
Nagengast and Stehrer (2016):Incorrect VA absorbed by direct importer.Imprecise double-counting.Lack of sectoral decomposition.
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Motivation and contributions New methods New tools
New tools: icio
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Motivation and contributions New methods New tools
Reducing complexity
The (painful) do-it-yourself approach:Lots of theory to get familiar with.Lots of data sources: difficult to use more than one database tocompare resultsMeasures of fragmentation are not easy to calculate: need to codethe proper algebra
icio is a Stata program that exploits different data sources to computein a simple way standard and more refined measures of trade in globalproduction networks.
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 13 / 33
Motivation and contributions New methods New tools
Reducing complexity
The (painful) do-it-yourself approach:Lots of theory to get familiar with.Lots of data sources: difficult to use more than one database tocompare resultsMeasures of fragmentation are not easy to calculate: need to codethe proper algebra
icio is a Stata program that exploits different data sources to computein a simple way standard and more refined measures of trade in globalproduction networks.
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 13 / 33
Motivation and contributions New methods New tools
Current release
This release:- Load WIOD, TiVA or user-provided tables- Define country-groups
Compute:Value-added in final demand (country and country-sector)Decomposition of aggregate exports (KWW, 2014)Bilateral-sectoral decomposition of exports (BM, 2017a)GVC participation (more on that coming soon)Positioning (next release)
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Motivation and contributions New methods New tools
Loading ICIO tables
Install the program in Stata:ssc install icio
Load an Input-Output table: WIOD and TiVA ready to useicio_load, iciot(wiod) year(2014)icio_load, iciot(tiva) year(2011)
But also user-provided tables might be used:icio_load, iciot(user, userp("D:\data\adb\csv")tablen(ADB_2011) countrylist(adb_countrylist))
Info on countries and sectors covered:icio, info
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 15 / 33
Motivation and contributions New methods New tools
Loading ICIO tables
Install the program in Stata:ssc install icio
Load an Input-Output table: WIOD and TiVA ready to useicio_load, iciot(wiod) year(2014)icio_load, iciot(tiva) year(2011)
But also user-provided tables might be used:icio_load, iciot(user, userp("D:\data\adb\csv")tablen(ADB_2011) countrylist(adb_countrylist))
Info on countries and sectors covered:icio, info
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 15 / 33
Motivation and contributions New methods New tools
Loading ICIO tables
Install the program in Stata:ssc install icio
Load an Input-Output table: WIOD and TiVA ready to useicio_load, iciot(wiod) year(2014)icio_load, iciot(tiva) year(2011)
But also user-provided tables might be used:icio_load, iciot(user, userp("D:\data\adb\csv")tablen(ADB_2011) countrylist(adb_countrylist))
Info on countries and sectors covered:icio, info
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 15 / 33
Motivation and contributions New methods New tools
Loading ICIO tables
Install the program in Stata:ssc install icio
Load an Input-Output table: WIOD and TiVA ready to useicio_load, iciot(wiod) year(2014)icio_load, iciot(tiva) year(2011)
But also user-provided tables might be used:icio_load, iciot(user, userp("D:\data\adb\csv")tablen(ADB_2011) countrylist(adb_countrylist))
Info on countries and sectors covered:icio, info
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 15 / 33
Motivation and contributions New methods New tools
Value-added in final demand
Computes the Italian value-added in the machinery and equipment sectorabsorbed by foreign countries’ final demand
. icio, origin(ita,19) vby(foreign)ITA´s value added from sector 19 absorbed by foreign countries: 35228.6ITA´s value added absorbed by foreign countries: 429051.2Share (%): 8.21ITA´s gross exports in sector 19: 91520.6ITA´s gross exports: 588585.2Share (%): 15.55. icio, origin(ita,19) destination(deu) vby(foreign)ITA´s value added from sector 19 absorbed by DEU: 3109.6ITA´s value added absorbed by DEU: 44135.6Share (%): 7.05ITA´s gross exports in sector 19 to DEU: 10309.5ITA´s gross exports to DEU: 76512.1Share (%): 13.47
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Motivation and contributions New methods New tools
Value-added in final demand
Computes the Italian value-added in machinery and equipment sectorabsorbed in the motor vehicles sector
. icio, origin(ita,19) destination(deu,20) vby(foreign)ITA´s value added from sector 19 absorbed by DEU´s sector 20: 317.8ITA´s value added from sector 19 absorbed by foreign countries´ sector 20: 2360.2Share (%): 13.46FVA from sector 19 absorbed by DEU´s sector 20: 2298.9Share (%): 13.82. icio, origin(ita,19) destination(ea2,20) vby(foreign) ///groups(fra, esp, "ea2")ITA´s value added from sector 19 absorbed by EA2´s sector 20: 257.0ITA´s value added from sector 19 absorbed by foreign countries´ sector 20: 2360.2Share (%): 10.89FVA from sector 19 absorbed by EA2´s sector 20: 2073.2Share (%): 12.39
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 17 / 33
Motivation and contributions New methods New tools
Decomposition of aggregate exports
Full KWW decomposition for Italy. icio, exporter(ita) kww output(detailed)Aggregate KWW decomposition (kww) gross exportsOutput: Detailed decompositionExporter: ITA
(´000$) % of exportkww1 200195994.38 34.02kww2 174078790.45 29.58kww3 54776447.94 9.31kww4 2317353.25 0.39kww5 1989121.49 0.34kww6 1884935.37 0.32kww7 63824767.37 10.85kww8 47590489.87 8.09kww9 41842793.19 7.11
Warning: DVA absorbed by direct importer (kww1+kww2) as definedin KWW is incorrect.
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 18 / 33
Motivation and contributions New methods New tools
Decomposition of aggregate exports
Full KWW decomposition for Italy. icio, exporter(ita) kww output(detailed)Aggregate KWW decomposition (kww) gross exportsOutput: Detailed decompositionExporter: ITA
(´000$) % of exportkww1 200195994.38 34.02kww2 174078790.45 29.58kww3 54776447.94 9.31kww4 2317353.25 0.39kww5 1989121.49 0.34kww6 1884935.37 0.32kww7 63824767.37 10.85kww8 47590489.87 8.09kww9 41842793.19 7.11
Warning: DVA absorbed by direct importer (kww1+kww2) as definedin KWW is incorrect.
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Motivation and contributions New methods New tools
Decomposition of aggregate exports
Selected output for KWW decomposition. icio, exporter(ita) kww output(dva)
(´000$) % of exportdva 433357707.50 73.64
. icio, exporter(ita) kww output(fva)
(´000$) % of exportfva 111415257.24 18.93
. icio, exporter(ita) kww output(fc)
(´000$) % of exportfc 153258050.43 26.04
Warning: FVA is incorrect in KWW decomposition.
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Motivation and contributions New methods New tools
Decomposition of aggregate exports
Selected output for KWW decomposition. icio, exporter(ita) kww output(dva)
(´000$) % of exportdva 433357707.50 73.64
. icio, exporter(ita) kww output(fva)
(´000$) % of exportfva 111415257.24 18.93
. icio, exporter(ita) kww output(fc)
(´000$) % of exportfc 153258050.43 26.04
Warning: FVA is incorrect in KWW decomposition.
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Motivation and contributions New methods New tools
Bilateral decomposition: implementation
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Motivation and contributions New methods New tools
Bilateral decomposition: options
icio, exporter(country_code) importer(country_code)bilateral(decomp_type) [bilateral_options ]
wheredecomp_type: source, sink, source_fvae, sink_fvae
Options are:origin(country_code)destination(country_code)
sector(sector_code,sector_type): exporter, origin, destination
output(output_type ): detailed, dva, fva, dc, fc, gvc
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Motivation and contributions New methods New tools
Bilateral decomposition: options
icio, exporter(country_code) importer(country_code)bilateral(decomp_type) [bilateral_options ]
wheredecomp_type: source, sink, source_fvae, sink_fvae
Options are:origin(country_code)destination(country_code)
sector(sector_code,sector_type): exporter, origin, destination
output(output_type ): detailed, dva, fva, dc, fc, gvc
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 21 / 33
Motivation and contributions New methods New tools
Bilateral decomposition: options
icio, exporter(country_code) importer(country_code)bilateral(decomp_type) [bilateral_options ]
wheredecomp_type: source, sink, source_fvae, sink_fvae
Options are:origin(country_code)destination(country_code)
sector(sector_code,sector_type): exporter, origin, destination
output(output_type ): detailed, dva, fva, dc, fc, gvc
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 21 / 33
Motivation and contributions New methods New tools
Bilateral decomposition: options
icio, exporter(country_code) importer(country_code)bilateral(decomp_type) [bilateral_options ]
wheredecomp_type: source, sink, source_fvae, sink_fvae
Options are:origin(country_code)destination(country_code)
sector(sector_code,sector_type): exporter, origin, destination
output(output_type ): detailed, dva, fva, dc, fc, gvc
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Motivation and contributions New methods New tools
Decomposition of Italian exports to Germany
. icio, exporter(ita) importer(deu) bilateral(source_fvae) output(detailed)Bilateral decomposition (source_fvae) gross exportsOutput: Detailed decompositionExporter: ITAImporter: DEUBilateral decomposition (source_fvae) gross exports: ITA -> DEU
(´000$) % of exportbm1a 23396358.98 30.58bm1b 22051.46 0.03bm1c 168404.01 0.22bm2a 11771493.95 15.39bm2b 244660.55 0.32bm2c 7352990.50 9.61bm3a 8915419.58 11.65bm3b 199312.14 0.26bm3c 363339.80 0.47bm3d 2053963.43 2.68bm4a 360858.74 0.47bm4b 7552.02 0.01bm4c 87451.21 0.11bm5 411250.49 0.54bm6 262259.75 0.34bm7 7383683.41 9.65bm8 4587105.30 6.00
bm9a 3758980.73 4.91bm9b 5034485.60 6.58bm9c 119637.23 0.16
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Motivation and contributions New methods New tools
Focus on origin of the VA: some figures on Brexit (1)
Foreign content of EU27 exports to the UK. icio, export(eu) import(gbr) bilat(source) output(fc) ///groups(aut,bel,bgr,cyp,cze,deu,dnk,esp,est,fin,fra,grc,hrv, ///hun,irl,ita,ltu,lux,lva,mlt,nld,pol,prt,rou,svk,svn,swe, "eu")Bilateral decomposition (source) gross exportsOutput: Foreign contentExporter: EUImporter: GBRBilateral decomposition (source) gross exports: EU -> GBR
(´000$) % of exportfc 77593895.63 18.95
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Motivation and contributions New methods New tools
Focus on origin of the VA: some figures on Brexit (2)
Foreign content of EU27 exports to the UK, originated in Asia. icio, origin(asia) exporter(eu) importer(gbr) bilateral(source) output(fc) ///groups(aut,bel,bgr,cyp,cze,deu,dnk,esp,est,fin,fra,grc,hrv,hun, irl,ita,ltu, ///lux,lva,mlt,nld,pol,prt,rou,svk,svn ,swe, "eu", chn, jpn, kor, twn, idn, "asia")Bilateral decomposition (source_fvae) gross exportsOutput: Foreign contentOrigin of value-added: ASIAExporter: EUImporter: GBRBilateral decomposition (source_fvae) gross exports: EU -> GBR
(´000$) % of exportfc 12818122.68 3.13
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Motivation and contributions New methods New tools
Focus on origin of the VA: some figures on Brexit (3)
EU27 productions in UK exports to the EU27. icio, origin(eu) export(gbr) import(eu) bilat(source) output(fc) ///groups(aut,bel,bgr,cyp,cze,deu,dnk,esp,est,fin,fra,grc,hrv,hun, ///irl,ita,ltu,lux,lva,mlt,nld,pol,prt,rou,svk,svn,swe, "eu")Bilateral decomposition (source) gross exportsOutput: Foreign contentOrigin of value-added: EUExporter: GBRImporter: EUBilateral decomposition (source) gross exports: GBR -> EU
(´000$) % of exportfc 25011612.54 8.56
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Motivation and contributions New methods New tools
Germany, hub of Factory Europe (1)
Italian VA absorbed by other EU countries. icio, exporter(ita) importer(deu) destination(oth_eu) bilateral(sink) output(dva) ///groups(aut,bel,bgr,cyp,cze,dnk,esp,est,fin,fra,grc,hrv,hun, ///irl,ltu,lux,lva,mlt,nld,pol,prt,rou,svk,svn,swe, "oth_eu")Bilateral decomposition (sink) gross exportsOutput: Domestic value-addedOrigin of value-added: ITAExporter: ITAImporter: DEUDestination of value-added: OTH_EUBilateral decomposition (sink) gross exports: ITA -> DEU
(´000$) % of exportdva 5942540.30 7.66
. icio, exporter(ita) importer(fra) destination(oth_eu) bilateral(sink) output(dva) ///groups(aut,bel,bgr,cyp,cze,dnk,esp,est,fin,deu,grc,hrv,hun, ///irl,ltu,lux,lva,mlt,nld,pol,prt,rou,svk,svn,swe, "oth_eu")Bilateral decomposition (sink) gross exportsOutput: Domestic value-addedOrigin of value-added: ITAExporter: ITAImporter: FRADestination of value-added: OTH_EUBilateral decomposition (sink) gross exports: ITA -> FRA
(´000$) % of exportdva 4017860.54 6.39
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Motivation and contributions New methods New tools
Germany, hub of Factory Europe (2)
Italian VA absorbed by Asian countries. icio, exporter(ita) importer(deu) destination(asia) bilateral(sink) output(dva) ///groups(chn, jpn, kor, twn, idn, "asia")Bilateral decomposition (sink) gross exportsOutput: Domestic value-addedOrigin of value-added: ITAExporter: ITAImporter: DEUDestination of value-added: ASIABilateral decomposition (sink) gross exports: ITA -> DEU
(´000$) % of exportdva 2708367.88 3.50
. icio, exporter(ita) importer(fra) destination(asia) bilateral(sink) output(dva) ///groups(chn, jpn, kor, twn, idn, "asia")Bilateral decomposition (sink) gross exportsOutput: Domestic value-addedOrigin of value-added: ITAExporter: ITAImporter: FRADestination of value-added: ASIABilateral decomposition (sink) gross exports: ITA -> FRA
(´000$) % of exportdva 1322091.38 2.10
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Motivation and contributions New methods New tools
Germany, hub of Factory Europe (3)
Italian VA absorbed by Asian countries. icio, exporter(ita) importer(deu) destination(asia) bilateral(sink) output(dva) ///sector(19, exporter) groups(chn, jpn, kor, twn, idn, "asia")Bilateral sectoral decomposition (sink) gross exportsOutput: Domestic value-addedExporter Sector: 19Origin of value-added: ITAExporter: ITAImporter: DEUDestination of value-added: ASIA
% of export:(´000$) sector
dva 480389.95 4.61
. icio, exporter(ita) importer(fra) destination(asia) bilateral(sink) output(dva) ///sector(19, exporter) groups(chn, jpn, kor, twn, idn, "asia")Bilateral sectoral decomposition (sink) gross exportsOutput: Domestic value-addedExporter Sector: 19Origin of value-added: ITAExporter: ITAImporter: FRADestination of value-added: ASIA
% of export:(´000$) sector
dva 201592.63 2.55
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Motivation and contributions New methods New tools
GVC-related trade
Goods and services crossing more than just the Italian border. icio, exporter(ita) importer(deu) bilateral(source) output(gvc)Bilateral decomposition (source) gross exportsOutput: GVC-related tradeExporter: ITAImporter: DEUBilateral decomposition (source) gross exports: ITA -> DEU
(´000$) % of exportgvc 41333405.94 54.03
. icio, exporter(ita) importer(usa) bilateral(source) output(gvc)Bilateral decomposition (source) gross exportsOutput: GVC-related tradeExporter: ITAImporter: USABilateral decomposition (source) gross exports: ITA -> USA
(´000$) % of exportgvc 14616638.14 32.31
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Motivation and contributions New methods New tools
Conclusions
New methods to measure trade in VA and countries’ participation inGVC
1 A new decomposition of bilateral-sectoral trade flows: flexible,accurate.
2 Refinements of traditional aggregate measures.
New tool, icio, to calculate standard and more refined measures
1 Flexible and user friendly.2 Still a work in progress, other measures will be added.
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Motivation and contributions New methods New tools
Conclusions
New methods to measure trade in VA and countries’ participation inGVC
1 A new decomposition of bilateral-sectoral trade flows: flexible,accurate.
2 Refinements of traditional aggregate measures.
New tool, icio, to calculate standard and more refined measures1 Flexible and user friendly.2 Still a work in progress, other measures will be added.
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Motivation and contributions New methods New tools
Thank you for your attention
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Bilateral decomposition: features (1)
Two different frameworks: sink and source (see Nagengast and Steherer,2016).
Sink: accounts the VA the last time it crosses the national border.Focus on destination country.Source: accounts the VA the first time it crosses the nationalborder. Focus on exporting country.
The choice depends on the the particular empirical application More .
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Bilateral decomposition: features (2)
Two different classifications of foreign VA:World trade perspective: foreign content considered as doublecounting when it crosses the second foreign border. Different logicfollowed for the domestic content.
Exporting country perspective: foreign content considered as doublecounting when it crosses again the exporting country border. Samelogic followed for the domestic content.
The world perspective is followed in KWW (2014) and the other bilateraldecompositions available, but not suited for most of the empiricalapplications More .
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Bilateral decomposition: features (2)
Two different classifications of foreign VA:World trade perspective: foreign content considered as doublecounting when it crosses the second foreign border. Different logicfollowed for the domestic content.Exporting country perspective: foreign content considered as doublecounting when it crosses again the exporting country border. Samelogic followed for the domestic content.
The world perspective is followed in KWW (2014) and the other bilateraldecompositions available, but not suited for most of the empiricalapplications More .
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Bilateral decomposition: features (2)
Two different classifications of foreign VA:World trade perspective: foreign content considered as doublecounting when it crosses the second foreign border. Different logicfollowed for the domestic content.Exporting country perspective: foreign content considered as doublecounting when it crosses again the exporting country border. Samelogic followed for the domestic content.
The world perspective is followed in KWW (2014) and the other bilateraldecompositions available, but not suited for most of the empiricalapplications More .
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DVA absorbed by the direct importerConsider country A exports (1 unit of VA)
1
AVA=1
B
In the KWW decomposition, A exports of intermediates are classified asdomestic VA of country A absorbed by the direct importer C, term 2 ofKWW, as VABAC YCC .However, C does not import directly from A!Intuition: the problem is the global inverse Leontief, BAC , since itaccounts for all the possible ways in which the intermediates of Acontribute to final goods produced in C Back .
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DVA absorbed by the direct importerConsider country A exports (1 unit of VA)
1
AVA=1
BVA=1
2C
In the KWW decomposition, A exports of intermediates are classified asdomestic VA of country A absorbed by the direct importer C, term 2 ofKWW, as VABAC YCC .However, C does not import directly from A!Intuition: the problem is the global inverse Leontief, BAC , since itaccounts for all the possible ways in which the intermediates of Acontribute to final goods produced in C Back .
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DVA absorbed by the direct importerConsider country A exports (1 unit of VA)
1
AVA=1
BVA=1
2C
VA=2 Y=44
In the KWW decomposition, A exports of intermediates are classified asdomestic VA of country A absorbed by the direct importer C, term 2 ofKWW, as VABAC YCC .However, C does not import directly from A!Intuition: the problem is the global inverse Leontief, BAC , since itaccounts for all the possible ways in which the intermediates of Acontribute to final goods produced in C Back .
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DVA absorbed by the direct importerConsider country A exports (1 unit of VA)
1
AVA=1
BVA=1
2C
VA=2 Y=44
In the KWW decomposition, A exports of intermediates are classified asdomestic VA of country A absorbed by the direct importer C, term 2 ofKWW, as VABAC YCC .
However, C does not import directly from A!Intuition: the problem is the global inverse Leontief, BAC , since itaccounts for all the possible ways in which the intermediates of Acontribute to final goods produced in C Back .
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DVA absorbed by the direct importerConsider country A exports (1 unit of VA)
1
AVA=1
BVA=1
2C
VA=2 Y=44
In the KWW decomposition, A exports of intermediates are classified asdomestic VA of country A absorbed by the direct importer C, term 2 ofKWW, as VABAC YCC .However, C does not import directly from A!
Intuition: the problem is the global inverse Leontief, BAC , since itaccounts for all the possible ways in which the intermediates of Acontribute to final goods produced in C Back .
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DVA absorbed by the direct importerConsider country A exports (1 unit of VA)
1
AVA=1
BVA=1
2C
VA=2 Y=44
In the KWW decomposition, A exports of intermediates are classified asdomestic VA of country A absorbed by the direct importer C, term 2 ofKWW, as VABAC YCC .However, C does not import directly from A!Intuition: the problem is the global inverse Leontief, BAC , since itaccounts for all the possible ways in which the intermediates of Acontribute to final goods produced in C Back .
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FVA and foreign double counting
Consider country A exports
BVA=1
A
1
In the KWW decomposition, country B VA in A exports (1 unit of VA) isclassified as foreign double counting in country A decomposition, term 9,as VBBBAAAB(I − ABB)
−1EB∗.However, this VA has never been accounted for in this scheme as foreignVA. Thus, it cannot be double counted! Back .
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FVA and foreign double counting
Consider country A exports
BVA=1
AVA=1
1
2
In the KWW decomposition, country B VA in A exports (1 unit of VA) isclassified as foreign double counting in country A decomposition, term 9,as VBBBAAAB(I − ABB)
−1EB∗.However, this VA has never been accounted for in this scheme as foreignVA. Thus, it cannot be double counted! Back .
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FVA and foreign double counting
Consider country A exports
CVA=0 Y=3
BVA=1+1
AVA=1
1
2
3
In the KWW decomposition, country B VA in A exports (1 unit of VA) isclassified as foreign double counting in country A decomposition, term 9,as VBBBAAAB(I − ABB)
−1EB∗.However, this VA has never been accounted for in this scheme as foreignVA. Thus, it cannot be double counted! Back .
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FVA and foreign double counting
Consider country A exports
CVA=0 Y=3
BVA=1+1
AVA=1
1
2
3
In the KWW decomposition, country B VA in A exports (1 unit of VA) isclassified as foreign double counting in country A decomposition, term 9,as VBBBAAAB(I − ABB)
−1EB∗.
However, this VA has never been accounted for in this scheme as foreignVA. Thus, it cannot be double counted! Back .
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FVA and foreign double counting
Consider country A exports
CVA=0 Y=3
BVA=1+1
AVA=1
1
2
3
In the KWW decomposition, country B VA in A exports (1 unit of VA) isclassified as foreign double counting in country A decomposition, term 9,as VBBBAAAB(I − ABB)
−1EB∗.However, this VA has never been accounted for in this scheme as foreignVA. Thus, it cannot be double counted! Back .
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
ITA fabric
VA=1
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
FRA
1
FRA fabric
VA=1
ITA fabric
VA=1
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
FRA
ITA fabric
VA=1
1
2
FRA fabric
VA=1
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
FRA
1
2
FRA fabric
VA=1
ITA garment
VA=1+1=2
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
US market
VA=0 Y=3
3
FRA
ITA fabric
VA=1
1
2
ITA garment
VA=1+1=2
FRA fabric
VA=1
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
US market
VA=0 Y=3
3
FRA
ITA fabric
VA=1
1
2
ITA garment
VA=1+1=2
FRA fabric
VA=1
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
US market
VA=0 Y=3
3
FRA
ITA fabric
VA=1
1
2
ITA garment
VA=1+1=2
FRA fabric
VA=1
Sink: 2 ITA VA
Sink: 1 ITA DC 1 FVA
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
US market
VA=0 Y=3
3
FRA
ITA fabric
VA=1
1
2
ITA garment
VA=1+1=2
FRA fabric
VA=1
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Bilateral decomposition of trade flows: sink and sourceSink and source based approach: how to assign VA to bilateral trade?
US market
VA=0 Y=3
3
FRA
ITA fabric
VA=1
1
2
ITA garment
VA=1+1=2
FRA fabric
VA=1
Source: 1 ITA VA
Source: 1 ITA VA
1 ITA DC 1 FVA
Sink: IT→FR: 1 DC VAIT ; IT→US: 2 VAIT, 1 VAFR
Source: IT→FR: 1 VAIT; IT→US: 1 VAIT, 1 VAFR , 1 DC VAIT Back
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
B
1
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
B VA=1
A
1
2
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
B VA=1
A VA=1
D VA=0 Y=3
1
2 3
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
B VA=1
A VA=1
D VA=0 Y=3
1
2 3
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
B VA=1
A VA=1
D VA=0 Y=3
1
2 3
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
B VA=1
A VA=1
D VA=0 Y=3
1
2 3
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.
This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (source)Consider country A exports
C VA=1
B VA=1
A VA=1
D VA=0 Y=3
1
2 3
In a source approach, A exports of C’s VA are classified as FDC, asVC (I − ACC )
−1ACBBBAEAD , while A exports of B’s VA as FVA, asVB(I − ABB)
−1ABA(I − AAA)−1YAD .
This choice is arbitrary and unsatisfactory, if the focus is on A’s exports.This VA is double counted just at the world level (flows 2 and 3), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
BVA=1
A
1
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.However, if we are interested in country A’s exports, this is unsatisfactory.This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
BVA=1
AVA=1
1
2
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.However, if we are interested in country A’s exports, this is unsatisfactory.This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
CVA=1
BVA=1+1
AVA=1
1
2
3
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.However, if we are interested in country A’s exports, this is unsatisfactory.This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
CVA=1
BVA=1+1
AVA=1
1
2
3
DVA=0 Y=4
4
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.However, if we are interested in country A’s exports, this is unsatisfactory.This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
CVA=1
BVA=1+1
AVA=1
1
2
3
DVA=0 Y=4
4
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.However, if we are interested in country A’s exports, this is unsatisfactory.This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
CVA=1
BVA=1+1
AVA=1
1
2
3
DVA=0 Y=4
4
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.
However, if we are interested in country A’s exports, this is unsatisfactory.This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
CVA=1
BVA=1+1
AVA=1
1
2
3
DVA=0 Y=4
4
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.However, if we are interested in country A’s exports, this is unsatisfactory.
This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
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Alternative breakdown of foreign content (sink)
Consider country A exports
CVA=1
BVA=1+1
AVA=1
1
2
3
DVA=0 Y=4
4
In a sink approach, A exports of B’s VA are classified as FDC, asVBBBAAAB(I − ABB)
−1EB∗.However, if we are interested in country A’s exports, this is unsatisfactory.This VA is double counted just at the world level (flows 2 and 4), but notin the country’s A perspective back .
Belotti, Borin, Mancini Follow the Value Added Workshop on GVCs 38 / 33