Slicing up Global Value Chains
In this paper we provide a new decomposition method for global value chains. Based on an analysis of vertically integrated industries, we trace the flow of final expenditures to factor income around the world. Using a new world input-output database, we find that in 38 out of the 40 countries the degree of vertical integration has increased between 1995 and 2006. We also find strong trends in regional value added shares in worldwide manufacturing expenditure. China was capturing about 11% in 2006, up from 5% in 1995, mainly at the expense of Japan, while the shares of the EU and NAFTA declined only marginally. In China and other developing regions low-skilled workers increased their shares, but not so much as medium-skilled workers and capital. Compensation shares for high-skilled workers have gone up around the world, in particular in the EU and NAFTA.