Measuring Trade in Value Added with Firm-Level Data

35 Pages Posted: 14 Jan 2020

See all articles by Rudolfs Bems

Rudolfs Bems

International Monetary Fund (IMF); European Central Bank (ECB)

Ken Kikkawa

University of British Columbia (UBC) - Sauder School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: January 2020

Abstract

Global Value Chains have proliferated economic policy debates. Yet a key concept---trade in value added---is likely mismeasured because of sectoral aggregation bias stemming from reliance on input-output tables. This paper uses comprehensive firm-level data on both domestic and international transactions to study this bias. We find that sectoral aggregation leads to overstated trade in value added and, correspondingly, understated import content of gross exports. The economic magnitude of the estimated bias varies from moderate to large---at 2-5 p.p. of gross exports for Belgium and 17 p.p. for China. We study how the interplay between within-sector heterogeneities in firm import and export intensities and firm size determine the magnitude of the sectoral aggregation bias.

Keywords: Aggregation bias, global value chains, Input-Output Tables

JEL Classification: E01, F14, L14

Suggested Citation

Bems, Rudolfs and Kikkawa, Ken, Measuring Trade in Value Added with Firm-Level Data (January 2020). CEPR Discussion Paper No. DP14281, Available at SSRN: https://ssrn.com/abstract=3518622

Rudolfs Bems (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Ken Kikkawa

University of British Columbia (UBC) - Sauder School of Business ( email )

2053 Main Mall
Vancouver, BC V6T 1Z2
Canada

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