International Value-Added Linkages in Development Accounting

52 Pages Posted: 31 Oct 2018

See all articles by Alejandro Cuñat

Alejandro Cuñat

University of Vienna

Robert Zymek

University of Edinburgh - School of Economics

Date Written: 2018

Abstract

We generalise the traditional development-accounting framework to an open-economy setting. In addition to factor endowments and productivity, relative factor costs emerge as a source of real-income variation across countries. These are shaped by bilateral trade determinants (which underpin the patterns of “international value-added linkages”) and the global distribution of factor endowments and final expenditures. We use information on endowments, trade balances and value-added trade to back out the relative factor costs of 40 major economies in a theory-consistent manner. This reduces the variation in “residual” productivity required to explain the observed per-capita income differences by more than one half.

Keywords: world input-output, development accounting, productivity

JEL Classification: E010, F150, F400, F620, F630

Suggested Citation

Cuñat, Alejandro and Zymek, Robert, International Value-Added Linkages in Development Accounting (2018). CESifo Working Paper No. 7196, Available at SSRN: https://ssrn.com/abstract=3275368 or http://dx.doi.org/10.2139/ssrn.3275368

Alejandro Cuñat (Contact Author)

University of Vienna ( email )

Bruenner Strasse 72
Vienna, Vienna 1090
Austria

Robert Zymek

University of Edinburgh - School of Economics ( email )

31 Buccleuch Place
Edinburgh, EH8 9JT
United Kingdom

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