Measurement and Determinants of Trade in Value Added

49 Pages Posted: 3 Oct 2013 Last revised: 16 Oct 2013

See all articles by Nakgyoon Choi

Nakgyoon Choi

Korea Institute for International Economic Policy

Date Written: April 10, 2013

Abstract

This study measures the trade in value added using the World Input Output Tables and the socio-economic accounts of 40 countries and 35 industries from 1996 to 2009. Specifically, this study analyzes the effects of trade on the value added, based on Meng et al. (2006), WTO and IDE-JETRO (2011), Stehrer (2012), Stehrer et al. (2012). The measurement results indicate that export and import values in value added turned out to be smaller than the values in gross value. However, the trade balance in terms of value added does not necessarily shrink compared to the bilateral trade balance in terms of gross value.

This study also investigates the determinants of trade in value added, incorporating the gravity model, the Heckscher-Ohlin model, and the Ricardian model. When we use the data on trade in value added, the explanatory power of the gravity model turned out to be relatively small compared to the pooled data on trade in gross value, but that of the Heckscher-Ohlin model turned out to be stronger while the Ricardian model revealed mixed results.

Interestingly in our investigations, the elasticities of the Heckscher-Ohlin as well as the Ricardian parameters have been increasing while that of the gravity model has remained stable during the period 1996-2009. This result implies that trade patterns can be better explained by factor endowment and technological differences during the 2000s compared to the 1990s.

Keywords: Trade in Value Added, Determinants of Trade in Value Added

JEL Classification: F10, F11, F40

Suggested Citation

Choi, Nakgyoon, Measurement and Determinants of Trade in Value Added (April 10, 2013). KIEP Research Paper No.Working Papers-13-01, Available at SSRN: https://ssrn.com/abstract=2317706 or http://dx.doi.org/10.2139/ssrn.2317706

Nakgyoon Choi (Contact Author)

Korea Institute for International Economic Policy ( email )

[30147] Building C, Sejong National Research Compl
Seoul, 370
Korea, Republic of (South Korea)

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