Abstract
Studies on the rise of global value chains (GVCs) have attracted a great deal of interest in the recent economics literature. However, due to statistical and methodological challenges, most existing researches ignore domestic regional heterogeneity in assessing the impact of joining GVCs. GVCs are supported not only directly by domestic regions that export goods and services to the world market, but also indirectly by other domestic regions that provide parts, components, and intermediate services to final exporting regions. To better understand the nature of a country’s position and degree of participation in GVCs, we need to fully examine the role of individual domestic regions. Understanding the domestic components of GVCs is especially important for larger economies such as China, the USA, India, and Japan, where there may be large variations in economic scale, geography of manufacturing, and development stages at the domestic regional level. This paper proposes a new framework for measuring domestic linkages to global value chains. This framework measures domestic linkages by endogenously embedding a target country’s (e.g., China or Japan) domestic inter-regional input–output tables into the OECD inter-country input–output model. Using this framework, we can more clearly understand how global production is fragmented and extended internationally and domestically.
Highlights
As one of the most useful tools for studying international production networks, intercountry input–output (ICIO) tables provide detailed information and have been widely used in both economic and environmental analyses, especially in areas related to today’s global value chains (GVCs) (see WTO-IDE 2011; OECD-WTO 2013; OECD-WTO-World Bank Group 2014; Koopman et al 2014 (KWW); and Meng et al 2015).If the focus of analysis is at only the country or inter-country level, the existing ICIO tables may be sufficient
3.1 China and Japan’s regional value‐added export by country/region of destination To investigate details of the bilateral structure of China and Japan’s regional export of value added, respectively, we calculate the share of value-added exports of a specific destination by country/region using both gross exports and value-added-based measures
We can see a significant difference for China’s central region. This result implies that the central region does not directly export a great deal to foreign countries in terms of gross exports, but it can participate in GVCs by providing intermediate products to coastal regions, thereby exporting more value added overseas
Summary
As one of the most useful tools for studying international production networks, intercountry input–output (ICIO) tables provide detailed information and have been widely used in both economic and environmental analyses (see Miller and Blair 2009; Murray and Wood 2010), especially in areas related to today’s global value chains (GVCs) (see WTO-IDE 2011; OECD-WTO 2013; OECD-WTO-World Bank Group 2014; Koopman et al 2014 (KWW); and Meng et al 2015).If the focus of analysis is at only the country or inter-country level, the existing ICIO tables may be sufficient. The response to the second question is to first conduct a bottom-up analysis to evaluate the impact of a specific region on the whole country and to measure the inter-country impact For both approaches, in the process of evaluating the inter-country impact based on the ICIO table, the target country is treated as a single entry (an economic point), without any information about its domestic regional heterogeneity. There is implicitly a strong assumption that all domestic regions have the same production function as the national average This may potentially lead to a large estimation bias in economic analyses for the target country if it has domestic regions with various heterogeneities in terms of regional economic endowments, geographic locations, developmental stages, industrial structures, and foreign independency
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