Made in the World Revisited

Abstract

In the last decade, the concept of ‘global value chain’ (GVC) has become popular to describe the way firms fragment production into different stages located in different economies. The ‘made in the world’ narrative suggests that production today is global with inputs coming from all parts of the world before being assembled into final products also shipped all over the world. The empirical basis of this story has however been questioned. On the one hand, recent evidence indicates that there is some kind of ‘deglobalisation’ with a trade slowdown and lower levels of fragmentation of production. On the other hand, some authors suggest that supply chains are regional rather than global. In this paper, we offer a comprehensive review of the evidence based on the 2018 update of the OECD Trade in Value-Added (TiVA) database and indicators counting the number of domestic and foreign production stages, border crossings and geographic length of supply chains. The study covers 1995 to 2016. The made in the world narrative is correct when describing the rise of GVCs in the 2000s. But globalisation has reached a peak in 2012 and since then supply chains are becoming more domestic rather than more regional. The ‘erosion’ in globalisation (i.e. the reduction in the average length of supply chains since 2012) is 52 kilometres per year.

Keywords: fragmentation of production, vertical specialization, global value chain

JEL Classification: F14, L16, L23