Give Credit Where Credit is Due: Tracing Value Added in Global Production Chains

Abstract

This working paper was written by Robert Koopman (United States International Trade Commission). William Powers (United States International Trade Commission), Zhi Wang (United States International Trade Commission) and Shang-Jin Wei (Columbia University, Centre for Economic Policy Research and National Bureau of Economic Research).

This paper presents a new conceptual framework to measure sources of value-added trade by country in global production networks. With a parsimonious decomposition of gross exports that eliminates "double counting", it integrates all previous measures of vertical specialization and value-added trade in the literature. We apply the framework to the most recent appropriate data (2004). Among emerging markets, East Asian countries are the most globally integrated. Among major developed economies, the US is the most integrated in some aspects, and Japan in others. These regional differences also affect exporters’ trade costs.

JEL Classification: F1, F2