Global Value Chain of Korea’s Automobile Industry in the Global Economy

Abstract

Purpose - This paper aims to analyze a disaggregated accounting structure that steadily breaks down Korea’s automobile gross exports at the sectoral, bilateral, and bilateral-sectoral levels into the sum of the various value-added and double counted items. Design/Methodology/Approach - The Leontief decomposition method is used to measure the value-added flows between industries. This method breaks down the Korean automobile sector and analyzes how changes within the sector can affect other sectors. Wang-Wei-Zhu decomposition method builds on the Leontief insight to give a more detailed look at the structures of international production networks and the respective positions of countries and sectors within them. Our dataset is derived from the World Input-Output Database (www.wiod.org), using the 2016 release version, with 2014 as the base year. The 56 sectors are aggregated into 30 while the 43 countries into 15. Findings - Korea’s principal export destinations include: the United States, Russia, China and Canada. The amount of value-added that the Korean Automobile sector has contributed to the exports of the Korean ship building sector is very significant when compared with that contributed to the exports of other sectors within the economy. Externally, the sector’s amount of value-added contribution to the exports of Russia’s mining sector (the world’s largest producer of diamonds and palladium) is very substantial. In terms of Korea’s bilateral exports, most of its exports to the United States are mainly in final goods while its trade with China is mostly in intermediate goods. Research Implications - Global value chains provide opportunities for developing countries to diversify their exports and intensify their integration into the global economy.