Working Paper: NBER ID: w22974
Authors: Robert C. Johnson; Guillermo Noguera
Abstract: We combine data on trade, production, and input use to document changes in the value added content of trade between 1970 and 2009. The ratio of value-added to gross exports fell by roughly 10 percentage points worldwide. The ratio declined 20 percentage points in manufacturing, but rose in non-manufacturing sectors. Declines also differ across countries and trade partners: they are larger for fast growing countries, for nearby trade partners, and among partners that adopt regional trade agreements. Using a multi-sector structural gravity model with input-output linkages, we show that changes in trade frictions play a dominant role in explaining all these facts.\n
Keywords: trade; value added; regional trade agreements; trade frictions
JEL Codes: F1; F4; F6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Changes in trade frictions (F19) | Value added to gross exports ratio (F10) |
| Changes in trade frictions (manufactured inputs) (F12) | Value added to gross exports ratio (F10) |
| Deeper trade agreements (customs unions) (F15) | Value added to gross exports ratio (F10) |
| Spread of RTAs (R50) | Global decline in value added to gross trade ratio (F14) |
| Trade frictions (F19) | Bilateral sourcing decisions (L14) |
| Distance and RTA adoption (R48) | Trade flows (F10) |
| Adoption of regional trade agreements (RTAs) (F13) | Value added to gross exports ratio (F10) |