Measuring EU value added em bodied in EU foreign exports by - PowerPoint PPT Presentation

24/ 04/ 2012 | 1 Measuring EU value added em bodied in EU foreign exports by consolidating 27 national SUTs for 20 0 0 -20 0 7 Maaike C. Bouwm eester, Jan Oosterhaven & José M. Rueda-Cantuche WIOD conference, Groningen, April 2012

24/ 04/ 2012 | 2 The literature: how to consolidate? 1. Non-survey : estimate margins of IOT & use RAS or CRAS; not for EU27 with abundant SUT & IOT data 2. Survey : estimate international IOT from national IOTs & international trade data; repricing bilateral import block matrix with c.i.f. prices to balance with exports block column with f.o.b. prices 3. Future : start with national SUTs, not with IOTs 4. Our m ethod : do not estimate a full intercountry SUT; only needs data intra-EU vs. Extra-EU trade

24/ 04/ 2012 | 3 Overview of consolidation m ethod 1. Sim ple sum of 27 harmonised Dom estic Use tables in basic prices; 27 intra-EU Import tables + 27 extra-EU Import tables in c.i.f. prices 2. Re-estim ation of crude EU27 Im port table from c.i.f. prices into basic prices, correction of re-exports = core step of construction process 3. Add domestic and new intra-EU import use table 4. Sim ple sum of 27 harmonized Supply tables

24/ 04/ 2012 | 4 Crudely consolidated EU27 Use table Red part of table should disappear Domestic Domestic 1 2 intermediate final 1: Exports to intra-EU countries use use 2: Exports to extra-EU countries Intra-EU Intra-EU 3: Re-exports, imported from intra-EU, exported to intra-EU final 3 4 intermediate imports 4: Re-exports, imported from intra-EU, exported to extra-EU imports 5: Re-exports, imported from extra-EU, exported to intra-EU Extra-EU Extra-EU final 5 6 6: Re-exports, imported from extra-EU, exported to extra-EU intermediate imports imports 7: Taxes less subsidies on products (TLS) on intra-EU exports TLS 8: Taxes less subsidies on products (TLS) on extra-EU exports TLS 7 8

3 = Italian shoes via Austria to Czechia, OK 4 = Italian shoes via 7 = deduct TLS on 24/ 04/ 2012 | 5 Austria to Swiss, not OK intra-EU im ports Domestic Domestic Domesti Domestic 1 2 1 2 final intermediate c final intermediate demand use demand use -/- + Intra-EU Intra-EU Intra-EU Intra-EU 3 4 final 4 final intermediate intermediate imports imports imports imports -/- -/- Extra-EU Extra-EU Extra-EU import for Extra-EU 5 6 import use 5 6 final final intermediate imports demand imports + TLS 7 + TLS 8 Adj. TLS Adjusted TLS 8

Re-scale total of intra-EU im ports to total of intra- EU exports, +10 % 5 = Swiss chocolate via 24/ 04/ 2012 | 6 Re-price im port rows to 1 France to Spain, not OK Domestic Domestic Domestic Domestic 1 2 1 2 intermediate final intermediate use final use demand demand Intra-EU Intra-EU Intra-EU Intra-EU final final intermediate intermediate imports imports imports imports -/- -/- + + Extra-EU Extra-EU Extra-EU Extra-EU final 5 6 final 6 intermediate intermediate imports imports imports imports + + -/- -/-

24/ 04/ 2012 | 7 Test: GDP em bodied in EU27 exports

Errors in embodied VA of EU-exports 18.0% 24/ 04/ 2012 | 8 16.0% 14.0% First order intra-EU Percentage of total spillovers (v1b) 12.0% Higher order 10.0% spillovers and intra- 8.0% EU feedbacks (v1c) Error of not 6.0% consolidating (v2) 4.0% Neglect of Intra-EU trade (v1b + v1c) 2.0% 0.0% 2000 2001 2002 2003 2004 2005 2006 2007 Year

24/ 04/ 2012 | 9 Decom position of consolidation errors › Unbiased value added specification error: domestic, spillover and feedback effects are all done with national ĉ r › Unbiased aggregation error: the above effects could have been made with the crudely consolidated SUT › Underestim ation of extra-EU exports : -12.4% › Rescaling intra-EU im ports : TLS -0.25%, Shoes to Swiss -11.6%, chocolate to Spain +9.6%, remaining gap with exports +10%; Repricing with GRAS

Errors in embodied VA of EU-exports 20.0% 24/ 04/ 2012 | 10 15.0% Error in factor coefficients (v2a) 10.0% Percentage of total Error from 5.0% aggregation (v2b) 0.0% Error of non- 2000 2001 2002 2003 2004 2005 2006 2007 correction of -5.0% extra-EU exports (v2c) Error of non- -10.0% correction of intra- EU imports (v2d) -15.0% Error of not consolidating (v2) -20.0% Year

24/ 04/ 2012 | 11 Sum m ary of em pirical outcom es › All % are large , as such, and because the direct impact of EU-exports on EU-value added is included (an IO model not needed to estimate that) › A crudely consolidated SUT, and thus the IOT, has large errors due to not correcting intra-EU trade › Behind the large aggregate EU27 errors even larger errors of ± 50% are found at the 59 industry level

24/ 04/ 2012 | 12 Conclusion and discussion › Even with the 27.2% underestimation removed, EU27 exports to third countries contribute only a meager 11.2% to EU27 GDP › Thus: internal market efficiency and innovativeness could well be far more important than external competitiveness !