Working Paper: CEPR ID: DP14281
Authors: Rudolfs Bems; Ayumu Ken Kikkawa
Abstract: Global Value Chains have proliferated in 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 domestic and international transactions to study this bias. We find that sectoral aggregation leads to overstated trade in value added. The magnitude of the bias varies across countries—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 firms' import and export intensities and size determine the magnitude of the bias.
Keywords: global value chains; input-output tables; aggregation bias
JEL Codes: E01; F14; L14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| sectoral aggregation (E10) | overstatement of domestic value added in exports (F14) |
| firm-level heterogeneities in import and export intensities (F12) | overstatement of domestic value added in exports (F14) |
| higher import and export intensities (F10) | bias in aggregated data (C83) |
| increasing sectoral detail (R15) | mitigate bias (D91) |