Working Paper: CEPR ID: DP17230
Authors: Jean Imbs; Laurent Pauwels
Abstract: We introduce a measure of exposure to foreign shocks -openness- that computes the fraction of output subjected to foreign shocks at any order. The measure is easy to obtain for any sector with input-output data; It implies that openness is much more prevalent than often thought, especially in services. Theoretically the new measure correlates systematically with the response of productivity to foreignshocks because it reflects high order linkages in output (rather than trade). Empirically it also correlates highly with productivity in an international sample of sector level data. None of these conclusions are true for conventional measures of openness.
Keywords: measurement of openness; global value chains; shock propagation; growth; productivity; synchronization
JEL Codes: F15; F44; F62; C80
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high order trade linkages (HOT) (F12) | labor productivity growth (O49) |
| high order trade linkages (HOT) (F12) | synchronization of business cycles (F44) |
| exports (X) and trade in value-added (TIVA) (F14) | labor productivity growth (O49) |