Inter-Country Input-Output Research Articles

Environmental Dimension of Value Chain Linkages: Empirical Assessment of India’s Manufacturing Sector

The emergence of global value chains (GVCs) has presented emerging nations like India with possibilities to combine into the worldwide economic system, which has had a major effect on the economy and the environment. With India’s manufacturing sector accounting for 15% of India’s gross value added, it is one of the main engines of the country’s economic expansion. Additionally, it is vulnerable to changes in technology and ranks second in terms of carbon dioxide (CO2) emissions, after the production of electricity. This study attempts to draw interrelations between CO2 emissions embodied in trade and GVC participation for this sector. Using the autoregressive distributive lag approach for the time period 1995–2018, this study exhibits significant cointegration between value chain participation and embodied emissions in gross exports for the short run and long run. However, while the impact of economic growth is positive for foreign emissions embodied through imported intermediates and negative for the emissions embodied in India’s exports of domestic goods, there exist important policy implications in this regard. Also, it is vital for an emerging nation like India to accord primacy to other indicators like the Environmental Stringency Index and spending on research and development so as to reduce its carbon emissions and improve its ecology. Novelty in this study arises from the fact that it utilises inter-country input–output statistics, OECD on fuel combustion to the resident industry and household, where carbon emissions have been decomposed into the foreign and domestic emissions embodied in gross exports for India’s manufacturing sector. JEL Classification: F110, F664, B223

A Systematic Review of The Use of Inter-Country Input-Output (ICIO) Table in Agri-Food Global Value Chain Analysis

The Inter-Country Input-Output (ICIO) table serves as the primary tool and database for Global Value Chain (GVC) analysis. It enables the description and analysis of the connection between production and consumption activities in international trade, while also providing comprehensive information for economic and environmental analysis. A more in-depth systematic literature review examining the use of ICIO tables in GVC analysis on agriculture and foods sector has never been conducted. Hence, the objective of this study is to do a comprehensive examination of existing literature to get insights into the progress of research on GVC analysis utilizing the Input-Output (ICIO) table throughout the past decade. We performed a comprehensive examination of existing literature to consolidate the research themes related to the utilization of ICIO tables in GVC analysis and to comprehend how they are applied to satisfy the research goals. The research findings indicate that the ICIO table is extensively employed in GVC analysis for cross-border international commerce, sector and industry analysis, as well as GVC impact and modelling. WIOD is the most-used database in GVC analysis as it has the most industries, followed by EROA as database that covers the most countries.

A Distributed Computational Model for Estimating the Carbon Footprints of Companies

A new approach based on input–output (IO) analysis has emerged to estimate the carbon footprints of companies and their products from cradle to gate. While the approach relies on the same principles as the GHG Protocol, it uses a distributed iterative framework to improve the footprint estimations and reduce their uncertainty. While optimal estimations would result if all the world’s companies would enter such a system, this paper shows how such a distributed system could apply to the real world where many enterprises would stay out of the system. We show how the quality of the estimations with respect to the GHG Protocol would be increased by integrating scope 1 and scope 2 data from the value chains in the footprint estimations and progressively reducing the part of the remaining scope 3 data. To help with analyzing uncertainty, we show how to use the scope 1/2/3 decomposition to estimate the biases and the standard deviations of the computed production carbon intensities. We illustrate the model on macroeconomic data for 44 sectors and two regions (Europe and Rest of World), using the Inter-Country Input–Output database from the OECD. Such a system would necessarily rely on Information and Communication Technology, since the companies would be permanently interconnected in a large-scale meshed network, using an application protocol for data exchange.

Revisiting the carbon-economic inequality within global value chain considering corporate heterogeneity: Evidence from China's trade

The mismatch between trade-embodied economic benefits and CO2 emissions gives rise to inherent inequality within the era of global value chains (GVCs), whereas the existing accounting framework failed to distinguish between multinational corporations and local firms. Taking China as a case study, this study developed a novel Inter-country Input-output (ICIO) model based on the trade in factor income (TiFI) principle, while considering corporate heterogeneity. The findings reveal that when bilateral trades are measured in terms of trade in traditional value added (TiVA) principle, China's trade surplus with five partners was overestimated by 61 % from 2010 to 2015, with the United States being particularly overvalued by nearly 45 %. At the industry level, the Non-metallic manufacturing and Retail sectors accounted for over 10 % of China's exports, surpassing TiVA in terms of market share, indicating that China's contribution to crucial export sectors is underestimated. However, the evaluation based on the TiFI principle revealed a 27 % reduction in the overall carbon deficit, indicating that China's contribution to global carbon emissions continued to decline. The carbon-economic inequality (CEI) index between China and its trading partners indicates a value greater than or equal to 1, implying that China has encountered setbacks in global carbon trading. Notably, the application of the TiVA principle results in an underestimation of CEI between China-United States and China-South Korea, with respective values ranging from −0.13 to 0.27 and − 0.05 to 0.05. Overall, this study offers valuable scientific evidence towards addressing accountability and promoting climate justice.

The shipping industry under the EU Green Deal: An Input-Output impact analysis

In 2021, the European Commission introduced the ‘Fit for 55’ package, a set of policies aimed at reducing greenhouse gas (GHG) emissions by at least 55% by the year 2030. This initiative, aligned with the European Green Deal, seeks to make Europe a climate-neutral continent by 2050. A pivotal aspect of ‘Fit for 55’ is the proposed extension of the European Union Emissions Trading System (EU ETS) to the shipping industry. According to the European Commission, water transport accounts for 2.5% of global GHG emissions, while the shipping industry accounts for 13% of the EU’s GHG emissions from transportation.This stringent new shipping policy makes it imperative to determine how the world’s economy will respond, considering three distinct implementation proposals with different rates of policy introduction. Evaluating the short-term impacts of the policy is crucial to ensuring that the sustainability initiative is not only ambitious but also pragmatic and adaptable to the realities. To assess the implications, this paper uses the Leontief price model, the environmental input–output (EIO) model, and the OECD Inter-Country Input-Output (ICIO) Table for 2018, which contains information for 45 sectors. The focus is on EU countries and its Top 10 Trading Countries.Our findings show that a short-term trade-off exists between economic and environmental goals and that environmental gains incur economic losses for key stakeholders. They also show that the impact of this policy is felt more by producers in the EU and consumers in non-EU countries than by other agents in the respective countries. Lastly, a recommendation from our study is that the policy should be phased in progressively to provide economic agents with the necessary adjustment time and thus minimize economic losses.

Geographical proximity and technological similarity

From a time-space perspective, we assess the effects of geographical proximity on technological convergence over time identifying proximity dimensions associated with countries’ technological similarities. We compare a time series of input-output coefficients for 66 different countries extracted from the 2021 edition of OECD Inter-Country Input-Output to verify whether nearby countries are more likely to share similar technologies. Our results reveal that geographical technological spillovers are important since closer economies tend to be more similar than distant ones. This is particularly evident for the European economies in the sample, suggesting that institutional proximity also matters for technological convergence. Over time, closer economies are becoming structurally more similar; however, this trend seems to have slowed down after the 2008–9 financial crisis. Conjectures on how informational gaps are filled in the consolidation of the databases – encountered in an environment of limited information – based on known practices of using regional and global average structures may add a layer of uncertainty to our results.

The effect of service outsourcing on labor income share: Measuring labor income share from the global value chains perspective.

Inspired by the positive impact of service outsourcing in Chery and other enterprises on human resources, this paper explores the impact of service outsourcing on labor income share. This paper introduces a framework to analyze how value added is distributed between capital and labor along the mix of inputs from different countries and sectors participating in global value chains and examines the effect of service outsourcing on the labor share income. Using the World Input-Output Database (WIOD) and OECD Inter-Country Input-Output (OECD- ICIO) table, this paper utilizes the WWZ decomposition method of global value chains (GVCs) to quantify labor share income. The results show that: (1) service outsourcing significantly contributes to the increase in labor share income; (2) Offshore outsourcing had a statistically stronger effect on labor share income after the financial crisis, both compared to the past and to onshore outsourcing; (3) Offshore outsourcing has a higher coefficient in countries with low technology. For ease of comparison, only onshore outsourcing shows a statistically significant difference among various service types; (4) The analysis using Chinese data reveals that the coefficient of offshore outsourcing is negative and statistically significant, indicating that industries with higher levels of service outsourcing have a lower labor share income.

Tracing carbon emissions and intensity in relational global value chain activities

Existing studies on emission accounting in global value chains (GVCs) have not focused on the relational nature of GVC activities manifested as the interaction of intermediate goods between enterprises. This paper proposes a relational GVC emissions accounting framework based on an inter-country input-output (ICIO) model distinguishing between domestic-owned enterprises (DOEs) and foreign-invested enterprises (FIEs), which is classified as trade-based, investment-based and hybrid-based emissions. Using AMNE-ICIO tables from 2005 to 2016, this paper traces emissions and carbon intensity in relational GVC activities at the global, economic, and industry levels. We find the following: (1) Investment-based emissions accounted for about 94.15% of the increase in relational GVC emissions, of which more than half comes from the interactive activities between DOEs and FIEs. (2) For the United States, high-income economies, and high-tech manufacturing, investment-based emissions were higher than trade-based emissions, and the reverse was true for upper-middle and lower-middle income economies and China. (3) Although relational GVC carbon intensity was high, the trend of decline was significant. (4) Compared to trade activities, investment-based activities were less carbon intensity in China and upper-middle income economies due to the interaction of production between FIEs and DOEs. The findings add new insights into the coordination of global emissions reductions and the allocation of emissions responsibility.

Productivity and Global Value Chains: A Tale from the Indonesian Automobile Sector

Low productivity and quality of employment have always been a big problem in Indonesia, caused by the lack and mismatch of skills in the workforce. Labor productivity (LP) describes the company’s ability to produce something. This can be determined by added value or output. Several factors influence LP, such as education, age, and training. The concept of global value chains (GVCs) has become an integral part of economic activity, and trade within global production networks has grown more rapidly than conventional trade in final goods. GVCs have both positive and negative impacts on employment opportunities. The automotive industry is categorised as one of the ten primary priority industries in the Indonesian manufacturing sector. This research analyses the impact of LP on GVC integration in the Indonesian automotive industry. The data used in this research comes from the World Input–Output Database (WIOD) and the Central Statistics Agency (BPS) from 1995 to 2014. The variables used include the number of workers, added value, real wages, and GVC, which were calculated by the author using the Inter-Country Input–Output (ICIO) approach. Using ICIO analysis, the following matrix should be constructed to determine involvement in GVCs. This research shows that LP in the Indonesian automotive industry has a positive trend, and the GVC position in the Indonesian automotive industry has a positive trend line. The domestic value chain increased from 4% to 33%. This improves the ability to produce higher value-added and intermediate export goods. LP increases the domestic value chain in the Indonesian automotive industry, leading to global value chain integration. Thus, LP goes hand in hand with integrating GVCs.

The impact of the Brexit referendum on UK’s value-added exports: A structural decomposition

This article uses for the first time inter-country input–output data and a structural decomposition method to assess the impact of the 2016 Brexit referendum on the United Kingdom’s value-added exports. We find that final demand explains less than 30% of the 6.9-point decline in the UK’s value-added exports in 2016 (with a market share loss that offset the positive impact of global demand), whereas more than 70% was due to extraordinary changes in input sourcing decisions of the rest of the world. This means that the UK’s value-added exports were structurally affected by the weakening of the linkage effects of providing inputs to the rest of the world, especially to the EU. This article paves the way for further analyses of the structural effects of Brexit and other trade and industrial policies that alter the international allocation of inputs.

The Status, Trend, and Global Position of China’s Forestry Industry: An Anatomy Based on the Global Value Chain Paradigm

This study aims to systematically examine the developmental attributes and trends within China’s forestry sector through the lens of a global value chain (GVC) framework. To this end, this research analyzes the Organization for Economic Co-operation and Development Inter-Country Input–Output (OECD-ICIO) database, using a cohesive set of GVC methods, including the forward decomposition of industry value-added, an assessment of industry upstream and downstream positions, the decomposition of export values, and analysis of trade competitiveness indicators. The trajectory of China’s forestry industry hinges upon the interplay between foreign demand and domestic demand. The results reveal a transition in China’s forestry sector development model from export-focused to a domestically driven approach. The proportion of value-added that is devoted to meeting domestic demands within the wood processing and papermaking industries has surged to 76% and 82%, respectively. Among the major economies, China has the highest output upstream index and input downstream index in the forestry industry, playing a vital role in propelling and pulling other industries into the global value chain system. The proportion of domestic added-value in China’s forestry industry exports ranks among the top, reflecting strong self-sufficiency in export production. Although China’s forestry industry possesses a high world market share, its overall international competitiveness is weak, especially with clear signs of weakening comparative advantages in the wood processing industry.

Integration in the global value chain, structural change, and the widening gender employment gap in China

Despite the structural change toward services that are generally beneficial for female employment, China's gender employment gap (GEG) has widened by 9.64% in the past two decades, 2000–2020, indicated by the labor force participation rate (LFP) of males minus that of females. This study distinguishes domestic demand and different types of global value chain (GVC) related demand under the inter-country input–output framework, and propose a new gender gap decomposition model to explore the evolution of China's GEG from a demand-side perspective. Our results show that GVC-related activities contributed to the widening of China's GEG by less than 0.60% between 2000 and 2020. In contrast, increasing gender discrimination toward females and technological progress with a rapid decrease in employment when producing the same amount of output in most female-intensive sectors are the dominant reasons behind the widening of China's GEG. This study provides some implications for promoting high-quality employment development in China.

Measuring digitalization effects in China: A global value chain perspective

Measuring the digitalization effect, especially in traditional industries, is crucial for both economic researchers and policy makers. We quantify the effect and the rate of digitalization at the sectoral level in China from the perspective of production on the basis of the Inter-Country Input–Output (ICIO) accounting framework, which allows us to account for digitalization in traditional industries through value chains. Our results indicate that digitalization has developed rapidly in China and has become an important path for the transformation and upgrading of traditional industries. We show that global value chain (GVC) activities have significant digitalization characteristics in China and that digitalization promotes the sectoral reconstruction of China's GVCs. By constructing a GDP growth account that is consistent with our digitalization measure to capture the inter-temporal impact of digitalization through the investment channel, we find that the growth in digital capital input contributes to GDP growth in China and several world major economies and that the effect can be significant for developing countries that are experiencing rapid growth in investment.

Two sides of the same coin: The economic and environmental effects of China's international trade from a global value chain perspective

China's accession to the World Trade Organization (WTO) has led to rapid economic growth and international trade development. However, China is also challenged with a heavy environmental burden due to the massive carbon emissions transferred through trade. By splitting production activities into traditional trade and global value chain (GVC) activities, this paper uses an intercountry input-output (ICIO) framework to study the imbalances of the economic and environmental effects between China's imports and exports at different levels. We define the indices value added per embodied emission in imports and exports (VPM and VPX, respectively). Additionally, we find a large gap between China's VPM and VPX, primarily because developed economies gain much higher value added per embodied emission than China gained through exports in GVC activities. Then, we study how to narrow the gap between China's VPM and VPX. The application of multiplicative structural decomposition analysis (SDA) and the logarithmic mean Divisia index I (LMDI-I) approach reveals the total and bilateral-sectoral contributions of the driving factor effects to the changes in China's VPM and VPX. The results provide tailored implications for promoting the comprehensive economic and environmental benefits of China's imports and exports.

Global value chains and domestic innovation

This paper explores how changes in both position and participation in Global Value Chain (GVC) networks affect firm innovation. The analysis combines matched patent-firm data for Japan with measures of GVC network centrality and GVC participation using the OECD Inter-Country Input-Output (ICIO) Tables over the period from 1995 to 2011. We find that Japan's position in GVCs has shifted from being at the core of Asian value chains towards the periphery relative to other countries in the network, i.e., becoming less “central”. We use China's accession to the World Trade Organization as an instrumental variable for changes in Japanese centrality. Our analysis shows that increases in Japanese sectors' forward centrality – i.e. as a key supplier - tend to be positively associated with increasing firms' patent applications in these sectors and that firms in key hubs within GVCs, specifically as key suppliers, appear to benefit from knowledge spillovers from downstream markets.

Measuring what matters in value-added trade

The spread of global value chains (GVCs) has given rise to new statistical tools, the inter-country input–output tables, and new analytical frameworks aimed at properly identifying production linkages between and within economies. However, several important questions remain unaddressed. This paper proposes a new toolkit for value-added accounting of trade flows at the aggregate, bilateral, and sectoral levels. The paper shows how different empirical issues require distinct accounting perspectives and maps these methodologies onto the economic questions they are best suited to address. We provide novel accounting perspectives that allow us to properly address important empirical issues. With respect to other accounting methodologies previously proposed in the literature, we offer more accurate or, in some cases, more exhaustive value-added decompositions of trade flows (e.g. by covering both domestic and foreign value-added). In addition, the paper gathers a significant amount of the related literature under one comprehensive framework.

Prices and Inflation in Global Value Chains : A global inflation-to-output price elasticity database with applications

Global value chains (GVCs) are important transmitters of product price shocks, which, in the end, will be expressed in national inflation rates. This paper deals with this phenomenon by presenting and applying an input-output model of global cost-push price transmissions using the 2021 edition of OECD Inter-Country Input-Output (ICIO) tables. Output prices are linked to several inflation rates by the concept of inflation-to-output price elasticity. Inflation elastici-ties are decomposed into local, simple, and complex global value chain effects and collected into the Global Inflation-to-Output Price Elasticity Database (GIOPED) published along with the paper. A step-by-step guide shows how to import data and perform quick interactive form impact analyses in Microsoft Excel. The presented GIOPED exercises reveal that local value chains are still dominant in determining inflation, although there are significant differences bet-ween countries. For Hungary, selected for an illustrative country study, inflation elasticities are higher with smaller domestic components, and exposures to current global shocks are consi-derable. Movements of energy commodity prices explain about a third of autumn 2022 Hunga-rian inflation rates.

Consistency of micro- and macro-level data on global value chains: Evidence from selected European countries

This study investigates the degree of consistency and fungibility of micro and macro sources of global value chain (GVC) data. We combine two datasets for selected European countries over the period 2001–2014: the European Union-European Firms in a Global Economy (EU-EFIGE) firm-level dataset (integrated with panel balance sheet data from Amadeus) and the World Input–Output Database (WIOD) at the country and sectoral level. Although the two datasets come from different sources and are based on different assumptions, we find that (i) the WIOD-based country and sectoral GVC indicators are positively correlated with firm-level proxies based on EFIGE data; and (ii) the GVC indicators from both sources are positively correlated with firm-level labor productivity. These outcomes are robust to various empirical tests and specifications, as well as to controlling for firm, sector, and country heterogeneity. Our results hold relevance for scholars by demonstrating that the available inter-country input–output (ICIO) data can be used to compensate for the scarcity of firm-level data for evidence-based GVC analyses. • We contribute to the applied literature by making methodological advances in GVC data use. • We combine the available micro and macro GVC data for four European countries. • We demonstrate that GVC measures computed from the two data sources are highly consistent. • We advocate utilizing the available ICIO data sources for evidence-based GVC analyses.

The Motor Vehicles Industry in Slovakia, 2005 – 2015

This note examines the evolution of the Slovak motor vehicles sector during 2005-2015, drawing on the latest update (December 2018) of OECD's Inter-Country Input-Output (ICIO) model database. The review takes a global value chain (GVC) approach and looks at the linkages from the gross production and value added perspectives. The overall contribution of the motor vehicles sector to Slovakia's gross production and domestic value added increased twofold during the reference period. There was an ongoing change in the structure of the GVC linkages. The reliance on domestically-sourced inputs increased over the years. The (indirect) value added created in the production of domestically-sourced inputs gradually approached the level of the (direct) value added generated within the motor vehicles sector. Subsequent to the global financial crisis, the share of intermediate goods in exports, the forward linkage of the GVC, and the upstreamness of the production process were all on a rising trend. The sourcing pattern of imports of intermediate inputs and the market for exports steadily shifted away from the euro area towards non-EU countries. It is estimated that a hypothetical 10 percent negative shock to global final demand for motor vehicles would lower Slovak GDP growth by 1 percentage point.

An international multi-sectoral approach to financialisation

Abstract Many studies attempted to measure the degree of financialisation of an economy, generally on a country-by-country basis, given the heterogeneity of indicators and data availability. In this paper, a simple but common measure of financialisation of non-financial corporations (NFCs) is developed, namely, the participation of services provided by the financial sector (both directly and indirectly) on their value-added creation process, inspired by the methodology developed by Dávila-Fernández and Punzo (2020). To do this, we use the inter-country input-output (ICIO) matrices built by the OECD, which allow us to understand the role played by the financial sector (local or foreign) in the ‘value-added production function’ of NFCs from 45 industries, in 67 countries for the period 1995–2018. We find three main stylised facts. First, the financial sector plays a relevant role in the value-added creation process of NFCs, and its importance has increased during the last years, although there is high diversity among countries. Second, this process has been heterogeneous when different productive sectors are considered. Primary industries evidenced a low degree of financialisation, while manufacturing and the service sector generally presented a higher reliance on finance. Third, between 1995 and the global financial crisis, NFCs increased their dependence on foreign financial value-added, followed by a partial reversion of this process. Moreover, the origin of these exports of financial services changed: while some traditional financial hubs such as the UK, Switzerland and Japan decreased their importance as providers of financial value-added to NFCs, China, Russia and India became important global players.