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Wiener Institut für Internationale Wirtschaftsvergleiche

The Vienna Institute for International Economic Studies

www.wiiw.ac.at

Robert StehrerThe Vienna Institute for International Economic Studies (wiiw)Robert.Stehrer@wiiw.ac.at

WTO workshop, February 2-4, 2011 – WTO, GenevaVersion: 2011-02-01

Decomposing net trade in value added and

the patterns of trade in factors

The WIOD-project is funded by the European Commission, Research Directorate General as part of the 7th Framework Programme, Theme 8: Socio-Economic Sciences and Humanities, Grant Agreement no: 225 281.

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WIOD project – www.wiod.org

The World Input-Output Database (WIOD)

Project funded within the 7th framework program of the EU- 10+OECD partners involved- Project started in May 2009 and ends in April 2012

Construction and applications- Construction of inter-country SUT/IO tables- Socio-economic and environmental satellite accounts- Data publicly available in May 2012- Various applications ...

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WIOD project – Data coverage

Inter-country Supply-Use and Input-Output tables- Benchmarked to NA data

Period: 1995-2006 (maybe with extension)

40 countries included- EU-15 countries- EU-12 countries- NAFTA: Canada, USA, Mexico- BRI: Brazil, Russia, India- CHN: China- OTHER: Turkey, Japan, South Korea, Taiwan, Indonesia, Australia

Sector and product classifications of SUTs- 59 products (corresponding to CPA)- 35 industries (corresponding to NACE rev. 1)

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WIOD project – Data coverage

Trade data- Goods trade (HS 6-digit – use category – CPA)- Services trade (BoP codes)

Satellite accounts- Energy and environment (emmission, etc.)- Socio-economic indicators

Capital (ICT and Non-ICT) Labour by three educational attainment categories

Deflated tables

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Dataflows and construction steps

Public statistics National accounts Supply and use tables

International trade statistics

(time-series) (infrequent) (time-series)

Total Final demand by type Supply (Basic price) Imports and exportsTotal Export/Import Use (Purchasers' price) on bilateral basis

Value added by industry - of goodsGross output by industry - of services

HarmonisationEstimation

Supply (Basic price)Use (Basic price)Valuation matrix

Estimation

Supply (Basic price)Valuation matrix

Domestic use (Basic price)

Estimation

Time series World input-output tables

For each country

Bilateral import shares by use

Import use (Basic price) by delivering country

Time series for each country

Time series for each country

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Construction of International WIOT

Final domestic

use

Final domestic

use

Final domestic

use

Intermediate use

Intermediate use

Intermediate use

Country B

Final use of domestic

output

Rest of World

Final use by RoW of

exports from A

Final use by RoW of

exports from B

Output in RoW

Final use by B of exports

from A

Final use of domestic

output

Final use by B of exports from RoW

Country ACountry B

Industry

Intermediate use by B of

imports from RoW

Rest of World

Industry

Intermediate use by RoW of imports from

A

Intermediate use by RoW of imports from

B

Intermediate use of

domestic output

Country B

Rest of World (RoW)

Industry

Ind

ust

ry

Intermediate use of

domestic output

Ind

ust

ry

Country AOutput

in A

Final use of domestic

output

Total

Ind

ust

ry

Final use by A of exports

from B

Final use by A of exports from RoW

Intermediate use by B of

imports from A

Country A

Output in A

Value added

Output in B

Output in RoW

Intermediate use by A of

imports from B

Intermediate use by A of

imports from RoW

Intermediate use of

domestic output

Value added

Output in B

Value added

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Value added trade and the factor content of trade

Related literature

Vertical specialisation- Hummels, Ishii and Yi (2001), etc.- Daudin, Rifflart and Schweisguth (2008, 2009)- Johnson and Noguera (2009)- Koopman, Power, Wang and Wei (2010)- Many others- Focus on exports

Factor content of trade (when intermediates are traded)- Reimer (2006)- Trefler and Zhu (2010)- Focus on HOV and relationship of trade in factors to endowments

This approach:- Foster and Stehrer (2011), forthcoming- Focus: Decomposition of net trade in value added and components

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Accounting for trade in intermediates(following Reimer, JIE 2006; Trefler and Zhu, JIE 2010)

N … Number of countries; G … Number of industries; F … Number of factors

Direct plus indirect factor input

A … coefficient matrix of dimension NG x NGD … direct factor input matrix of dimension F x NG

‘Bilateral’ (NG x N) import-export matrix

1)( AIDB

][ rpxT

Value added trade and the factor content of trade

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Factor content of trade with three countries for country c=1

where

Some manipulations …

111 )(' tAIdt kk

Value added trade and the factor content of trade

),,( 312111 xxxt

3133321323*1313

3123221222*1212

3113121121*1111

1

xlvxlvxlv

xlvxlvxlv

xlvxlvxlv

Tk

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Value added trade and the factor content of trade

3133321323*1313

3123221222*1212

3113121121*1111

1

xlvxlvxlv

xlvxlvxlv

xlvxlvxlv

Tk

Direct exports

Indirect exports(‘true’ VS1 ) Direct imports

Re-Imports (VS1 )

Indirectimports

1*

1

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Selected results

Decomposition of net value added trade and components

Regional patterns of net value added trade and components

Notes: • Focus of presentation on EU-15 and NAFTA • January 2011 version of WIOD• ROW not included in calculations• Results partly based on imputed values regarding factor inputs

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Decomposition of value added trade

EU-15 NAFTAin bn US-$ in bn US-$

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Decomposition of trade in labour

EU-15 NAFTAin bn US-$ in bn US-$

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Decomposition of trade in high-educated labour

EU-15 NAFTAin bn US-$ in bn US-$

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Net exports of EU-15

Goods and services Value addedin bn US-$ in bn US-$

-300.0

-250.0

-200.0

-150.0

-100.0

-50.0

0.0

50.0

100.0

1995 2000 2005

BRI CHN EU12 EU15

NAFTA OTHER TOTAL

-300.0

-250.0

-200.0

-150.0

-100.0

-50.0

0.0

50.0

100.0

1995 2000 2005

BRI CHN EU12 EU15

NAFTA OTHER TOTAL

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Net exports of NAFTA

Goods and services Value addedin bn US-$ in bn US-$

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Net exports in labour and capital services – EU15

Labour Capitalin bn US-$ in bn US-$

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Net exports in labour and capital services – NAFTA

Labour Capitalin bn US-$ in bn US-$

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Net exports by educational categories

EU-15 NAFTAin bn US-$ in bn US-$

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Trade in value added: ICT capital

in bn US-$

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Next steps: Analysis

the obvious candidates which are mutually related• (Directed) Factor and sector biased technical change

• Change in trade and output patterns

• Change in intermediates trade

• Change in factor rewards

TAIDT fV1

, )(' Decomposition based on basic equation

Further steps, extensions, caveats: • Breakdown of trade data into final goods and intermediates (and subcomponents like P&C)• Sectoral breakdowns and differentiations• Bilateral relations• Testing HOV theorem with traded intermediates• Double counting problem• Non-competing imports

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Next steps: Data

Improvement on data Improving national SUTs Improving bilateral trade in services and trade in goods

• Re-exports

Improving breakdown by use categories (see below)• Comparing our use-classification of trade flows with official import IO tables.

Improving factor input data for non-OECD countries • as part of work by World KLEMS consortium

Constant price series

Additional data Processing export trade tables for Mexico and China Margin tables (transport costs, tariffs, and domestic margins of exports)

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Thank you for attention!

Robert Stehrer

The Vienna Institute for International Economic Studies – wiiw

www.wiiw.ac.at

Robert.Stehrer@wiiw.ac.at

The WIOD project: www.wiod.org