Mapping Global Value Chains Koen De Backer Sbastien Miroudot OECD - - PowerPoint PPT Presentation

Mapping Global Value Chains

Koen De Backer Sébastien Miroudot OECD

Final WIOD Conference: Causes and Consequences of Globalization Groningen, The Netherlands, April 24-26, 2012.

Why focusing on GVCs?

• A value chain can be defined as “the full range of activities

that firms and workers do to bring a product from its conception to its end use” (Gereffi and Fernandez-Stark, 2011).

• The fact that they are increasingly spread over several

countries explains why value chains are regarded as “global”.

• The concept of GVC was introduced in the early 2000s and

has been successful in capturing several characteristics of the world economy:

– The increasing fragmentation of production across countries – The specialisation of countries in tasks and business functions rather than specific products – The role of networks, global buyers and global suppliers

Why mapping GVCs is important

• 1. Trade policy
• 2. Trade and employment
• 3. National competitiveness and growth
• 4. Moving up the value chain and innovation
• 5. Global systemic risk

GVC indicators

• Participation in GVCs: to what extent are countries

participating in GVCs

– Import content (or foreign VA content) of exports – GVC participation index: imports and exports of inputs used in third countries (e.g., Koopman et al., 2011)

• Length of GVCs: how many production stages in GVCs

– Average propagation length (APLs) – Index of the num ber of production stages (Fally, 2011)

• Position of countries in GVCs: where are countries

positioned in GVCs

– VA as a percentage of gross output – Distance to final dem and index (Fally, 2011)

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New data available at the OECD

• Bilateral Trade Database by Industry and

by End-Use (BTDIxE)

• OECD inter-country input-output tables
• OECD ORBIS firm-level data

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The OECD Inter-Country Input-Output tables

• Three global input-output matrices estimated for the

years 1995, 2000 and 2005

• Based on national input-output tables harmonised by

the OECD

• Cover 56 countries and 37 industries
• Linked internationally using the Bilateral Trade by

Industry and End Use (BTDIxE) database and estimates of bilateral services trade flows.

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Country 1 Country 1 Country 1 Country 2 Country 2 Country 2 … Country1 Country 2 … Industry 1 Industry 2 … Industry 1 Industry 2 … … Country 1 Industry 1 Country 1 Industry 2 … Country 1 … Country 2 Industry 1 Country 2 Industry 2 … Country 2 … … … . . … … . . … … . . Value-added Gross output Total intermediate Components of final demand Use of domestic inputs Use of domestic inputs Use of foreign inputs Use of foreign inputs Interindustry transactions

Participation in GVCs

• The import content of exports (or foreign VA content of

exports) only looks backward: countries at the beginning of the value chain do not seem to participate in GVCs.

• Following Koopman et al. (2011) the GVC participation index

adds the foreign value-added in exports and the share of domestic VA in exports of intermediate inputs used for exports in third-countries.

• The GVC participation index for country i and industry k is:

where FV is the foreign VA embodied in gross exports E and IV the domestic VA embodied in third countries’ gross exports (IV).

ik ik ik ik

E IV E FV + =

ik

ipation GVC_Partic

GVC participation index in OECD countries, 2005

0% 10% 20% 30% 40% 50% 60% 70% 80% Czech Republic Luxembourg Estonia Slovak Republic Hungary Slovenia Finland Belgium Ireland Korea Austria Denmark Sweden Norway Portugal Netherlands France Italy Spain Poland Turkey Chile Israel Switzerland Germany United Kingdom Australia Greece United States Japan Canada New Zealand Mexico

Source: OECD ICIO model, indicator based on Koopm an et al. (2011)

GVC participation index in selected non-OECD countries, 2005

Source: OECD ICIO model, indicator based on Koopm an et al. (2011)

0% 10% 20% 30% 40% 50% 60% 70% 80%

Number of production stages

• Following Fally (2011), we calculate an index

measuring the number of production stages as: where μij is the value of inputs from industry j used to produce one dollar of goods in industry i.

• With one equation for each industry, we solve this

system of linear equations (that has a unique solution) to calculate Ni

• As we use an international I/ O table, we can

decompose Ni into its domestic and international component.

Average length of GVCs (2005)

1 1.2 1.4 1.6 1.8 2 2.2 2.4 1995 2000 2005 International Domestic

Source: OECD ICIO model, indicator based on Fally (2011)

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Length of GVCs, by industry (2005)

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1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 2.8 3.0

Motor vehicles Basic metals Electrical machinery Textile Food Rubber & plastics TV & comm. equip. Machinery & equip. Office & computing mach. Manufacturing nec Chemicals Fabricated metal products Wood Other transport equipment Construction Paper Other non-metallic Fuel Medical & optical instr. Utility Transport and storage Hotels & restaurants Agriculture Other social services Other Business Activities Post & telecoms Mining and quarrying Health & social work Wholesale & retail trade Finance & insurance Computer & rel. activities Public admin. Research & development Renting of equip. Real estate Education

Domestic International

Source: OECD ICIO model, indicator based on Fally (2011)

Distance to final demand

• Second indicator proposed by Fally (2011).
• Di reflects the number of production stages

between the production of a good i and final

• demand. The index is calculated as:

where φij is the fraction of production from industry i used as an intermediate in industry j.

∑

+ =

j j ij i

D D ϕ 1

Distance to final demand, by economy, 1995 and 2005

1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5

1995 2005

Source: OECD ICIO model, indicator based on Fally (2011)

GVC participation and distance to final demand: motor vehicle industry

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1 1.5 2 2.5 3 3.5 4 4.5 5 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Distance to final demand (right axis) GVC participation (left axis)

Source: OECD ICIO model, indicator based on Koopm an et al. (2011) , Fally (2011)

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0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 1 1.5 2 2.5 3 3.5 4 4.5 5 Distance to final demand (left) GVC participation index (right)

GVC participation and distance to final demand: computer services

Source: OECD ICIO model, indicator based on Koopm an et al. (2011) , Fally (2011)

Trade network of intermediate inputs: motor vehicle industry

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Source: OECD BTDIxE database

Main findings

• 1. Increasing importance of GVCs
• 2. Larger versus smaller countries
• 3. Not only Asia, but also NAFTA and EU
• 4. Emerging economies integrating GVCs

and specializing in inputs

Issues and next steps

• Improving the methodology, refining the

indicators

– Aggregation and homogeneity bias – Identification of trade in services – Conciliating trade statistics with national accounts across different countries

• Time lag in the data, updating
• More case studies and network analysis

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