Structure and Length of Value Chains

Abstract

A value chain has two dimensions: importance and length. Importance is given by the contribution of production relevant to this value chain to total production. Length corresponds to the average number of production stages a typical product has to undergo along this value chain. Wang et al. (2016) develop an analytical framework that decomposes industry value added or value of its final products along various value chain paths and measures the length of each component. This extends the analysis to domestic value chain and enhances the available analytical tools. Building on the ideas of Wang et al. (2016), this paper offers a distinct decomposition of total output, but attains mostly identical results. The contributions to the ongoing research include new or modified indicators that capture both dimensions to properly describe industry or country orientation towards and position in global value chains and a visualization method that brings together the results of all decompositions. For an empirical application, the paper utilizes the 2015 edition of the OECD Inter-Country Input-Output tables.