Made in ? - Trade in value added and factors

12  May 2011    4:00 pm CEST

Robert Stehrer, wiiw

In cooperation with:


wiiw, Rahlgasse 3, 1060 Vienna, lecture hall (entrance from the ground floor)


Based on recent approaches of measuring the factor content of trade when intermediates are traded we decompose value added trade and its components like capital and labour and further subcomponents (ICT and Non-ICT capital, educational attainment categories) distinguishing between direct, indirect and re-imports and –exports of value added and trade in factors. This adds to the literature by simultaneously considering both exports and imports allowing to focus on patterns and dynamics of net value added trade and its components rather than vertical specialisation patterns based on exports. As an extension we differentiate net value added trade flows resulting from trade in intermediate and final goods. The analysis can further be broken down to the industry level and bilateral trade relations. Empirically we present results of an application of the proposed decomposition method based on the recently compiled World Input-Output Database (WIOD) covering 40 countries and 35 industries over the period 1995-2006. We show that direct value added exports and imports dominate but the indirect part was increasing over time. This also holds for trade in factors with for example higher increases observed for high-educated labour. Patterns of trade in net value added closely resemble net trade flows but there are distinct patterns when looking at individual factors. For example, NAFTA countries are net exporters of high-educated labour mostly to EU-15 but have increasingly become net importers of low-educated labour from China.

Keywords: Factor Content of Trade, Trade Integration, Net Value Added Trade, Vertical Specialisation

JEL classification: F1, F11, D5