Decomposing value added in gross exports

Abstract

Several papers using intercountry IO tables have developed frameworks to decompose value added in gross exports and to remove potential double-counting in intermediate inputs. But these papers rely on different definitions for the domestic value added, foreign value added and double-counting terms, depending in particular on the perspective from which gross exports are decomposed (world level, country level or bilateral level). At this stage, it is very difficult for any user of value-added trade statistics to know what is calculated and which type of decomposition should be used. In this paper, we provide a general framework that relies on extraction matrices to unambiguously and consistently define domestic and foreign value-added terms in the world, country and bilateral perspective. This framework allows us to classify existing decompositions based on the perspective taken and their definition of double-counting. We also indicate the most relevant decompositions for different types of trade analysis.