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Appendix 2: Measures Used to Characterize Global Supply Chains

Author(s):
Nagwa Riad, Luca Errico, Christian Henn, Christian Saborowski, Mika Saito, and Jarkko Turunen
Published Date:
January 2012
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Various measures can be used to characterize global supply chains. Hummels, Ishii, and Yi (2001) were the first to measure the value of imported contents embodied in a country’s exports. Their measure, referred to as vertical specialization (VS) share of gross exports or to foreign value added (FVA) share in gross exports, is calculated as follows:

where u is a row vector of ones, AM is the imported inputs coefficients matrix, L is the Leontief matrix, E is a column vector of gross exports in each sector, and Ek is the total exports. By multiplying the column vector of gross exports E by the Leontief matrix, (I–AD)–1 where I is the identity matrix and AD is the domestic input coefficient matrix, one can compute the gross output needed to produce those exports. By multiplying those by import inputs coefficients, one can compute the total foreign inputs contained in gross exports. Finally, by dividing it by total exports, one can compute the FVA content share of gross exports.

The main source of data used is, as in Hummels, Ishii, and Yi (2001), the input-output tables from STAN/OECD. The input-output data are available for 36 emerging and advanced countries. The FVA shares in gross exports are computed for 36 countries (Table A2.1). The FVA contents in billion U.S. dollars (not shown) are aggregated to compute the VS share of world exports shown in Table 1 in the main text.

Table A2.1.FVA Share in Gross Exports(Percent of gross exports)
TotalManufacturing
TotalLTMLTMHTHT
199520051995200519952005199520051995200519952005
AUS13.914.118.720.215.115.016.521.727.525.932.222.5
AUT30.535.435.241.429.334.032.841.940.545.933.434.4
BEL41.344.448.353.543.844.448.358.252.256.439.040.2
BRA10.814.412.017.18.88.613.919.114.821.621.833.2
CAN27.027.933.937.916.621.726.035.745.946.432.346.2
CHE19.622.124.229.019.823.535.548.734.129.8
CHN15.527.416.630.415.619.615.226.617.529.620.148.5
CZE29.848.234.853.728.242.336.549.237.153.446.475.7
DEU20.827.823.230.922.425.426.137.622.530.124.131.2
DNK27.735.730.738.027.136.836.338.432.139.234.037.4
ESP26.634.232.542.623.528.529.342.937.547.332.950.2
FIN28.738.331.441.221.026.239.551.935.341.746.046.4
FRA19.827.224.633.318.523.627.040.325.534.929.129.2
GBR22.419.927.829.924.222.024.731.427.730.733.632.3
GRC15.826.024.935.216.518.538.350.425.931.331.621.3
HUN47.756.153.863.233.543.642.650.457.560.972.879.6
IDN14.918.122.824.418.218.421.224.036.337.342.932.9
IND10.413.413.019.78.310.420.528.715.519.019.726.8
IRL45.551.250.258.545.953.846.737.942.956.662.067.4
ISR16.037.916.350.79.976.716.445.620.433.324.530.0
ITA23.429.027.034.124.128.727.138.828.234.332.136.6
JPN8.215.29.117.49.016.613.723.97.615.710.021.5
KOR38.141.027.348.136.046.3
LUX40.558.542.752.036.852.545.554.037.950.737.737.7
MEX36.747.533.225.942.971.1
NDE35.838.943.448.938.836.948.557.843.047.047.654.8
NOR21.716.533.632.125.024.039.947.133.127.638.236.5
NZL18.318.821.221.918.620.228.124.527.827.325.4
POL15.330.917.638.414.529.621.138.918.842.212.954.0
PRT35.739.039.945.931.532.945.049.949.452.956.466.6
RUS10.610.913.615.218.921.210.212.218.321.1
SVK35.248.743.757.730.942.946.953.047.664.042.571.4
SWE28.933.432.739.422.829.438.751.634.338.836.933.9
TUR14.122.719.629.516.525.625.433.423.430.521.446.7
TWN34.948.539.754.532.541.633.658.836.955.648.854.4
USA9.512.312.617.38.710.313.523.712.517.916.617.4
Source: IMF staff estimates using OECD Input-Output Tables.Note: LT = low technology; MLT = medium-low technology; MHT = medium-high technology; HT = high technology (see Box 2 for more detail). AUS, Australia; AUT, Austria; BEL, Belgium; BRA, Brazil; CAN, Canada; CHE, Switzerland; CHN, China; CZE, Czech Republic; DEU, Germany; DNK, Denmark; ESP, Spain; FIN, Finland; FRA, France; GBR, United Kingdom; GRC, Greece; HUN, Hungary; IDN, Indonesia; IND, India; IRL, Ireland; ISR, Israel; ITA, Italy; JPN, Japan; KOR, Republic of Korea; LUX, Luxembourg; MEX, Mexico; NDE, Netherlands; NOR, Norway; NZL, New Zealand; POL, Poland; PRT, Portugal; RUS, Russian Federation; SVK, Slovak Republic; SWE, Sweden; TUR, Turkey; TWN, Taiwan Province of China.

Note that imported intermediates are both the imported intermediates used directly in output and the intermediates used to produce the domestic intermediate inputs that are then used in output. While the focus is on manufacturing exports, imported intermediates also include inputs from agriculture, services, and mining sectors. FVA shares are calculated by assuming that the same ratio of intermediates to output holds for exports.

To further decompose foreign value added by source country, following Koopman and others (2010), bilateral sectoral trade data from COMTRADE are supplemented for Japan, China, the United States, and Germany.40Tables A2.2 and A2.3 show the FVA content in gross exports in billion U.S. dollars and in percent of gross exports, respectively. These results are summarized in two figures in Chapter 2.

Table A2.2.FVA Content in Gross Exports by Countries of Origin(Billions of U.S. dollars)
Agr. and

mining
Manufacturing
CountryYearItemTotalTotalLTMLTMHTHTServices
China2005FVA232.502.13211.1543.5721.0468.7977.7519.22
Service43.050.4723.367.432.928.344.6719.22
EU2729.290.2029.094.441.689.2013.78
Japan40.010.2439.775.992.1211.9719.69
China
USA13.750.1213.632.920.724.395.60
OEA68.400.5367.8714.424.9020.8727.68
Rest of world38.010.5737.438.388.7014.026.33
DVA615.2315.11483.62178.9058.20163.8382.69116.50
Japan2005FVA100.980.0892.433.2317.4460.1911.578.47
Service17.730.019.250.321.466.680.798.47
EU279.990.019.990.300.907.641.15
Japan
China17.770.0117.760.651.4511.673.99
USA9.230.019.220.280.816.831.30
OEA15.520.0115.510.492.6510.072.31
Rest of world30.740.0330.711.1910.1717.322.03
DVA563.090.71438.5116.2855.48324.3942.36123.87
USA2005FVA136.384.02113.0211.5621.1360.7219.6019.33
Service28.090.408.361.571.194.171.4219.33
EU2720.910.6420.272.042.8813.441.91
Japan8.500.138.370.470.605.661.65
China12.980.1612.821.381.005.814.63
USA
OEA13.140.2712.871.171.025.685.00
Rest of world52.762.4250.334.9314.4525.974.99
DVA968.5532.12539.45100.1867.93278.3493.00396.97
Germany2005FVA310.001.96287.2432.5661.73160.7732.1820.80
Service58.150.4136.944.796.3721.754.0420.80
EU27146.520.91145.6116.8127.0690.0211.72
Japan8.310.038.280.320.505.112.34
China13.470.0513.422.081.065.884.41
USA14.590.0914.501.111.659.432.31
OEA12.930.0412.891.380.845.734.93
Rest of world56.030.4455.596.0724.2522.852.42
DVA805.578.53641.7595.39102.39372.9671.01155.29
Source: IMF staff estimates using OECD Input-Output Tables, UN Comtrade and OECD STAN data.Note: FVA = foreign value added (= service + EU27 + Japan + China + USA + OEA + rest of world); DVA = domestic value added; OEA = other east Asia (Hong Kong SAR, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan Province of China); LT = low technology; MLT = medium-low technology; MHT = medium-high technology; HT = high technology (see concordance table for more detail); gross exports (not shown in the table) = FVA + DVA.
Table A2.3.FVA Share in Gross Exports by Countries of Origin(Percent of gross exports)
Agr. and

mining
Manufacturing
CountryYearItemTotalTotalLTMLTMHTHTServices
China2005FVA27.412.430.419.626.629.648.514.2
Service5.12.83.43.33.73.62.914.2
EU273.51.14.22.02.14.08.6
Japan4.71.45.72.72.75.112.3
China
USA1.60.72.01.30.91.93.5
OEA8.13.09.86.56.29.017.3
Rest of world4.53.35.43.811.06.03.9
DVA72.687.669.680.473.470.451.585.8
Japan2005FVA15.29.517.416.623.915.721.56.4
Service2.71.11.71.62.01.71.56.4
EU271.50.81.91.51.22.02.1
Japan
China2.71.03.33.32.03.07.4
USA1.41.21.71.41.11.82.4
OEA2.31.22.92.53.62.64.3
Rest of world4.64.35.86.114.04.53.8
DVA84.890.582.683.476.184.378.593.6
USA2005FVA12.311.117.310.323.717.917.44.6
Service2.51.11.31.41.31.21.34.6
EU271.91.83.11.83.24.01.7
Japan0.80.41.30.40.71.71.5
China1.20.52.01.21.11.74.1
USA
OEA1.20.72.01.01.11.74.4
Rest of world4.86.77.74.416.27.74.4
DVA87.788.982.789.776.382.182.695.4
Germany2005FVA27.818.730.925.437.630.131.211.8
Service5.23.94.03.73.94.13.911.8
EU2713.18.615.713.116.516.911.4
Japan0.70.30.90.30.31.02.3
China1.20.51.41.60.61.14.3
USA1.30.81.60.91.01.82.2
OEA1.20.41.41.10.51.14.8
Rest of world5.04.26.04.714.84.32.3
DVA72.281.369.174.662.469.968.888.2
Source: IMF staff estimates using OECD Input-Output Tables, UN Comtrade and OECD STAN data.Note: FVA = foreign value added (= service + EU27 + Japan + China + USA + OEA + rest of world); DVA = domestic value added; OEA = other east Asia (Hong Kong SAR, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan Province of China); LT = low technology; MLT = medium-low technology; MHT = medium-high technology; HT = high technology (see concordance table for more detail); gross exports (not shown in the table) = FVA + DVA.

There are no data on bilateral trade in services and therefore foreign services are not decomposed into their countries of origin, but are included as a separate imported input.

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