Working Paper: NBER ID: w30953
Authors: Zhi Wang; Shangjin Wei; Kunfu Zhu
Abstract: Measuring country origins of factor content in bilateral or sector-level exports is important to understand evolution of regional and global value chains and the roles of individual country-sectors in these chains. This paper proposes a method to distinguish between measures based on backward and forward linkages and between net and gross factor content. It is consistent with the System of National Account Standard and has the adding-up property. In comparison, these properties do not hold for the “hypothetical extraction method” proposed by Los et al. (2016). We show a number of examples involving disaggregated trade in which the two methods diverge.
Keywords: Domestic Factor Content; Bilateral Trade; Sectoral Trade; Value Chains
JEL Codes: F10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| exports (F10) | domestic value added (F29) |
| domestic factor content (F20) | trade flows (F10) |
| domestic value added in exports (F14) | total domestic value added in gross exports (F10) |
| hypothetical extraction method (HEM) (C59) | inconsistency in adding-up property (D10) |
| value-added exports absorbed abroad (VAX) (F14) | total value of US gross exports to Japan and China (F10) |
| domestic value added in exports (DVA) (F14) | total value of US gross exports to Japan and China (F10) |
| domestic content in exports (DC) (F10) | total value of US gross exports to Japan and China (F10) |