Working Paper: NBER ID: w25868
Authors: Alonso de Gortari
Abstract: The patterns of production underlying the recent rise of global value chains (GVCs) have become increasingly complex. NAFTA supply chains, for example, are now deeply integrated: Using Mexican customs data, I find that exports to the U.S. use a much higher share of American inputs than exports to other countries. However, the conventional framework used to measure GVCs ignores this heterogeneity since it assumes that all output uses the same input mix. I develop a new framework that combines input-output data with additional information on supply chain linkages in order to construct GVCs reflecting the use of inputs observed in the latter. Improving measurement matters quantitatively since it affects both value-added trade measures and counterfactual experiments: I show that incorporating Mexican customs data raises the estimated share of U.S. value in U.S. imported Mexican manufactures from 18% to 30% and amplifies the welfare cost of a NAFTA trade war.
Keywords: Global Value Chains; Trade Policy; NAFTA; Welfare Costs
JEL Codes: C6; F1; F6
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| depth of integration in supply chains (L14) | economic impact of trade policies (F69) |
| methodology used for measuring GVCs (F12) | estimated economic impacts of trade policies (F69) |
| specialized inputs model assumptions (C67) | measured outcomes (C52) |
| increased share of U.S. value in Mexican exports (F14) | welfare costs of a NAFTA trade war (F69) |