Baltic States in Global Value Chains: Quantifying International Production Sharing at Bilateral and Sectoral Levels

Abstract

This monograph chapter presents data science applications in analysing global value chains (GVC) by decomposition of gross exports data. The purpose of this chapter is to evaluate changes in Baltic States’ participation in global value chains by quantifying international production sharing at bilateral and sectoral levels. To achieve this purpose, we used an accounting framework that decomposed a country's gross exports into various value-added components, including exports value-added, domestic content in intermediate exports, foreign content, and other double-counted value-added components. Such a framework integrates all the previous vertical specialization and value-added trade approaches into a unified framework. It makes it possible to assess countries’ participation in global value chains. We presented the disaggregated decomposition results of Baltic States with their trading partners in 56 sectors from 2000 to 2014 based on the World Input–Output Database. We revealed the patterns of cross-country production sharing. Empirical research results showed that the Baltic States’ participation in global value chains was growing during the research period. The biggest driver behind the growth was determined by foreign value-added increases in the countries’ exports. Gross exports decomposition into value-added elements revealed that a major part of foreign value-added was impacted by value-added originating from third countries. The growth of double-counted value-added was observed over different economic sectors, which indicated that countries tend to participate in longer global value chains. The paper is organised as follows. First, the input–output model as a basis for quantifying international production sharing is described. It provides the methodology used to break down gross exports into separate value-added components. Then the study's results on the involvement of the Baltic States in GVCs are presented.