Working Paper: NBER ID: w14109
Authors: Robert Koopman; Zhi Wang; Shangjin Wei
Abstract: The rise of China in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of domestic value added (DVA) in exports, but the computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By our estimation, the share of domestic content in exports by the PRC was about 50% before China's WTO membership, and has risen to over 60% since then. There are also interesting variations across sectors. Those sectors that are likely labeled as relatively sophisticated such as electronic devices have particularly low domestic content (about 30% or less).
Keywords: Chinese exports; Domestic value added; Processing trade; Global supply chains
JEL Codes: F10; F53
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Domestic content (L68) | Trade volume (F10) |
| Currency appreciation (F31) | Trade volume (F10) |
| Sophistication of exports (F10) | Income inequality (D31) |
| Processing trade (F19) | Domestic value added (F29) |
| Increase in domestic content (F69) | Overall domestic value added share (F62) |