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 number 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 demand 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 FV + E
ik
=
ipation
GVC_Partic
GVC participation index in OECD countries, 2005
0%
10%
20%
30%
40%
50%
60%
70%
80%
Cz ec h R ep ub lic Lu xem bou rg Es to nia Sl ova k R ep ub lic H un gary Sl ove ni a Fi nl an d B el giu m Ire lan d K or ea Au stri a Den m ar k Swe de n N orw ay Po rtu gal N et her la nd s Fran ce Ital y Sp ai n Pola nd Tu rk ey Chi le Is rae l Sw itze rl an d G erm an y U ni ted K in gd om Au stral ia G reec e U ni te d S tate s Jap an C an ad a Ne w Z ea la nd M ex ic o
Source: OECD ICIO model, indicator based on Koopman et al. (2011)
GVC participation index in selected non-OECD countries, 2005
Source: OECD ICIO model, indicator based on Koopman 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 μ ij 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 N i
• As we use an international I/O table, we can
decompose N i 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) 11
Length of GVCs, by industry (2005)
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1.0 1.2 1.4 1.6 2.0 2.2 2.4 2.6 1.8 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).
• D i reflects the number of production stages between the production of a good i and final demand. The index is calculated as:
where φ ij is the fraction of production from industry i used as an intermediate in industry j.
∑
+
=
j
j ij
i D
D 1 ϕ
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 Koopman et al. (2011) , Fally (2011)
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0 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 Koopman et al. (2011) , Fally (2011)
Trade network of intermediate inputs:
motor vehicle industry
Source: OECD BTDIxE database 17
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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