International Input Output Research Articles

International input–output linkages and changing business cycle volatility

We quantify the effects of changes in international input–output linkages on the nature of business cycles. We build a multi-country international business cycle model with manufacturing and non-manufacturing sectors that matches the input–output structure within and across countries. We find that, in our 23-country sample, changes in the international input–output linkages between 1970 and 2007 have led to a drop in output volatility in all countries, explaining up to a half of the drop in output volatility in a median country observed in the data. In the model, stronger international linkages tend to stabilize output in response to domestic shocks, and destabilize for foreign shocks. Since foreign shocks still play a modest role in driving domestic business cycles, the stabilization effects dominate. Nevertheless, changing international linkages have generated larger shock transmission across countries, increasing the risk of a global recession.

An input trade model with Keynesian unemployment: Bridging a gap between trade theory and international Input–Output analysis

AbstractThis study presents a trade model with (1) intermediate inputs, (2) link commodities, and (3) Keynesian unemployment. The model has linear input coefficients, stable commodity prices, and short‐run adjustment of the quantity supplied on the occasion of demand changes, making it compatible with international input–output tables and analysis. Given production techniques, labor endowments, upper limits of unemployment rates, markup rates, and final demand in each country, this model specifies feasible trade patterns and determines commodity prices, wage rates, gross outputs, employment/unemployment rates, national income, income distribution, and trade volumes/values for each pattern. Starting with a two‐country, three‐commodity case, this model expands to a multi‐country, multi‐commodity case.

An empirical approximation of the effects of trade sanctions with an application to Russia

SUMMARY We propose a data-based approximation of the effects of trade sanctions that can readily be computed on the basis of international input–output data. Approximated effects are very close to the exact responses obtained from a canonical multi-country multi-sector model, without having to make difficult calibration choices. We illustrate the approximation with trade sanctions against Russia and obtain estimates well within the existing range. Russia is much more affected by trade sanctions than the EU, even though the importance of EU markets for Russia has been falling, especially since 2014, with China picking up the slack. Within the EU the consequences are largest in ex-‘satellite’ countries of the Soviet Union: These countries do not typically have access to substitute markets and in fact have historically been highly dependent on Russia. This extreme and persistent dependence is at least partly explained by the existence of specific energy transport infrastructure (pipelines) that appears to constrain tightly the production of electricity. Our proposed approximation is practical and can be implemented in a variety of contexts: We have developed a web-based dashboard, accessible at https://exposure.trade/ that can be used to approximate the costs of trade sanctions for any combinations of sanctioning and sanctioned countries or sectors.

Research on the path of practical cooperation between China and European Union countries under the environment of carbon neutrality and peak carbon dioxide emissions

Globalization is increasing daily with the development of the world economy and society. International conflicts, cooperation, and interdependence in international environmental relations have become increasingly prominent, laying a theoretical and practical basis for international environmental cooperation. The ecological protection industries of China and the EU (European Union) are facing great development opportunities. Many EU member states have advantages in developing the environmental protection industry, which facilitates all-around cooperation in the environmental protection industry with my country. Based on the target policy background of PCDE (peak carbon dioxide emissions) and CN (carbon neutrality) and domestic and foreign research, this paper proposes a study on the practical cooperation path between China and EU countries. Based on international input–output data, an economic output CDE (carbon dioxide emission) matrix is constructed to characterize countries’ economic and CDE correlation, thus forming a global CDE network. The analysis shows that the contribution rate of energy structure effect and energy intensity fluctuates slowly, indicating a positive and negative alternation; Our government should adopt an active energy optimization policy, speed up the formulation of macro policies such as carbon tax on energy-consuming industries, continuously optimize the energy structure and reduce the CDE intensity. By 2023, China’s unit GDP will remain the same by 40–50% compared with 2022. Furthermore, the practical cooperation path proposed in this paper can provide valuable insights for policymakers and stakeholders in both China and the EU to promote the development of the environmental protection industry and achieve the common goal of carbon neutrality. The findings of this study can be used to inform the design and implementation of policies and initiatives aimed at reducing carbon emissions, improving energy efficiency, and promoting sustainable economic growth. Additionally, the international CDE network constructed in this study can serve as a useful tool for monitoring and evaluating the effectiveness of environmental policies and initiatives at the international level. Overall, this paper contributes to the scientific understanding of the complex relationship between economic development and environmental protection and provides practical guidance for promoting international cooperation in the environmental protection industry.

동북아 역내 제조업의 글로벌 공급망 변화와 특징 분석

Purpose: This paper analyzes how the manufacturing supply chain has changed over the past 20 years according to the trilateral division of labor between Korea, China and Japan. Also, by measuring changes in the trade structure and competitiveness between Korea, China and Japan during the same period, the effect on the changes in the supply chain between the three countries is examined.
 Research design, data, and methodology: This study analyzes the trade structure, export competitiveness, and supply and distribution structure of 10 manufacturing industries in Korea, China and Japan. The analysis period was set from 2000 to 2020. The statistics use the UN Comtrade and the Asian International Input-Output Table. In the analysis of the trade structure between Korea, China and Japan. The Revealed Symmetric Comparative Advantage (RSCA) index was introduced to analyze the trade structure between Korea, China and Japan. And for the supply chain structure between the three countries, the Leontief inverse multiplier decomposition of the International Input-Output Analysis was used.
 Results: As a result of the analysis, it was observed that the supply chain of the manufacturing industry between Korea, China and Japan has changed to an interdependent structure since 2010, and the reason for this is that the production technology gap between the three countries has been greatly reduced. Accordingly, the supply chain of the manufacturing industry between the three countries has shifted from the past one-way dependence structure to a two-way dependence structure. In terms of industry, the deepening dependence among the three countries centered on electrical/electromechanical machinery, metal products, general machinery, chemical products, transportation machinery, precision machinery and textile products, which are key export industries for both Korea, China and Japan, means that the supply and distribution structure is being strengthened.
 Implications: Considering the relationship between the supply chain between Korea, China and Japan from 2000 to 2020, institutional integration, such as the trilateral FTA, is delayed, but functional integration is deepening due to interdependence and complementarity and increased production and trade. However, if trade frictions or disputes between Korea, China and Japan occur between specific countries, it is interpreted that this can lead to negative effects, so-called big losses, not only for the country concerned but also for the other country.

INTERDEPENDENCE OF MANUFACTURING INDUSTRY BETWEEN KOREA AND ASEAN-5 COUNTRIES: ASIAN INTERNATIONAL INPUT-OUTPUT ANALYSIS

The purpose of this study is to analyze the interdependence of the manufacturing industry between South South Korea and ASEAN-5 countries. To conduct an international analysis for the manufacturing industries, an interregional input-output (IRIO) model is applied. The Asian International Input-Output Table (AIIO) provided by IDE-JETRO (2017) is employed and the spillover effects of manufacturing industry are compared in terms of inducement production, value added and backward/forward linkages. The results indicate that the production inducement outcome between Malaysia and South Korea and the effect of forward and backward linkage industry are high, and the dependence on industry is high. On the other hand, in terms of decomposition of value added exports to ASEAN from South South Korea in the manufacturing sector; Vietnam, Singapore, and Indonesia are the states where South South Korea's domestic value-added exports are high. The result shows that South South Korea is necessary to diversify economic cooperation between East Asian and ASEAN member states.

Trade networks and shock transmission capacity: a new taxonomy of Italian industries

Applying the social network analysis to domestic and international input–output tables, we position the Italian sectors within their trade networks to analyze their ability to transmit economic shocks within the economic system. In this context, we propose a new taxonomy that classifies sectors in terms of the extent to, and the speed at, which they tend to spread domestic and foreign impulses throughout the Italian economic system. Our results show a mismatch between the industries which have a central position within international trade network and industries which play a central role for the domestic propagation of shocks. In this vein, the capacity of transmitting stimuli from abroad is limited, weakening the possibility to benefit from positive shocks, even though it could partially provide a shelter from negative one in the international business cycle.

International Input-Output Linkages and Changing Business Cycle Volatility

International Input-Output Linkages and Changing Business Cycle Volatility

The pattern of economic growth in Indonesia in comparison with Malaysia and Thailand

The pattern of economic growth in Indonesia between 1995 and 2005 was analyzed to determine structural changes that occurred in Indonesia. A hypothetical analysis of Deviation from Proportional Growth was used in this study to better understand the structural change of a country by assuming a virtual economic structure. The author analyzed the Indonesian National Input-Output Table of 1995, 2000, and 2005 extracted from the Asian International Input-Output Table. A comparative study was also conducted for Malaysia and Thailand during the same period. The results revealed a shift away from the agricultural sector towards non-agricultural sectors in Indonesia, Malaysia, and Thailand between 1995 and 2005, confirming the existence of industrialization in these countries. Although the countries had a similar pattern of growth which is contributed mainly by the expansion of export from 1995–2000, the pattern of growth among the three countries was divergent from 2000–2005.

The smile curve: Evolving sources of value added in manufacturing

AbstractA dramatic disordering of global manufacturing has been seen in recent years. Production processes have fragmented, and many production stages have been offshored to developing nations. Organization of this new global supply chain has evolved into what are often called global value chains (GVCs). Less studied, but no less important, is the shift in the sectoral source of value added in manufactured exports. This phenomenon, often called the “smile curve,” involves a swing in the share of value added in manufactured exports that is generated in the manufacturing sector itself instead of, for example, in the pre‐ and post‐fabrication stages. Our paper presents new evidence quantifying the magnitude of the smile curve notion. Using international input–output databases, we find evidence supporting the smile curve at the aggregate level. Specifically, for almost all exporting sectors and nations, we find that the value added to exports has shifted decisively from the manufacturing sector to service sectors. We also find that developing countries reduced their own‐sourcing service value‐added share, while developed countries maintained their relatively high levels of own‐sourcing service value‐added share.

Isolating China: Deglobalisation and its Impact on Global Value Chains

As global value chains (GVCs) account for 80% of global trade, the revival of protectionism, amidst the looming trade tensions between United States and other trading partners, particularly China will dampen the international input–output relations. By using a multi-regional and multi-sectoral dynamic computable general equilibrium model, this study analyses China driven GVCs. The study explores the impact of tariff change on China and its major trading partners on economic variables like consumption, investment, government expenditure, exports and imports and sectors like electronic goods, coal, crude oil and machine equipment for the five-year period, that is, 2021–2025. GTAP 10 database has been used. The findings of the study suggest that although China’s dominance may diminish, yet it would continue to be one of the prominent players in GVC. Further, based on the results, the global economy can look forward to fragmented and locally oriented supply chains. At the sectoral level, the shorter supply chains would lead a further disjoint global trade system with a wider range of suppliers for similar products and hence increased regionalisation of production. JEL Codes: F10, F17, F60, F16, D58

Propagation of economic shocks through vertical and trade linkages in Korea: An empirical analysis

In the last two decades, manufacturing industries in Korea have become more concentrated, and interconnectedness across industries and across country borders has risen via vertical relationships and trade linkages. Using the industry-level international input–output data, this paper investigates the propagation of economic shocks in such a highly concentrated and interconnected structure, focusing on the role of vertical and trade linkages. The results establish that, first, the role of vertical and trade linkages in propagating economic shocks originated from both domestic sources and external sources is important. Second, the productivity impacts of a few key sources of economic shocks are relatively sizable. These findings highlight that economic shocks in a few key industries and/or major trading partners that are transmitted through vertical and trade linkages can lead to large swings in the overall economy. This paper contributes to the understanding of the potential interactions between the industrial structure and economic growth/stability.

International Input-Output Tables as a Tool for Structured Analysis and Assessment of Stability in Russian Transport Sector

Abstract The article describes the uses of multi-input/multi-output systems, with the aim of assessment of structural changes and stability in the Russian transport sector. Empirical input-output data for the period between the years 2000 and 2014 are used. A basic model and overview of the literature are given. The article summarizes the assessment of structural changes and stability. The author gives his own vision of a state of the Russian transport sector. The analysis is carried out for the transport sector as a whole as well as for the various transport modes. Analytical and quantitative results are presented. Assessments of the dynamics of several key economic indicators of the Russian transport sector based on the model calculations are discussed. The indicators were compared based on World Input-Output Database (WIOD) version 2016. It is shown that the share of intermediate goods and services in the transport sector’s gross output fell, while the share of final goods increased from 2000 to 2014. But the share of air transport in the transport sector’s gross output as a whole was stable in 2000-2014.

An assessment of import tariff costs for Italian exporting firms

Since production and trade are increasingly organized within global value chains (GVCs), assessing who effectively pays the cost of protection is not straightforward and since productive processes are internationally fragmented, quantifying the effects of trade policy requires an enhanced analytical framework that takes international input–output linkages into account to assess the implications trade costs have on competitiveness at national and sector levels. This paper defines a new synthetic measure of trade protection based on the value added in trade, capturing the effects that the tariff structure has on exporting firms that rely on imported intermediate inputs. The index, defined in a general equilibrium framework, provides a theoretically sound protection measurement in the context of GVCs. We assess trade protection by computing protection indexes at the bilateral level on both gross imports and imports to exports using the Global Trade Analysis Project computable general equilibrium model. These indexes are used to investigate the relationship between the European Union tariffs and integration of the Italian GVCs. In the case of Italy, imports to exports are overall less protected than gross imports with significant differences at the sector level. Despite the low levels of nominal protection, industrial sectors play a central role in explaining our results. EU tariffs mostly affect Italian exporting firms in the case of chemical products, wearing apparel and leather products.

Interregional price linkages of fossil-energy and food sectors: evidence from an international input–output analysis using the GTAP database

This study examined the impacts of price changes in fossil-energy resources on food prices across the world. We approached this issue with the input–output (IO) price model, which is suitable for evaluating the price effects due to cost-push (supply driven) processes through transaction linkages of intermediate goods. We employ an international interregional IO table comprising 14 regions and 57 industrial sectors, which is compiled from the global trade analysis project (GTAP) 9 database. The results revealed: (1) interregional price linkages are particularly strong between a wheat-producing region and energy producers in the adjacent regions; and (2) the world oil sector appears to exert the strongest effects on mechanized sectors (wheat, plant fibers and fishing) and regions practicing advanced agriculture (East Asia, the US, and Russia). Furthermore, a comparison with empirical observations suggests that approximately one tenth of observed 2-year price changes in US wheat in 2004–2016 can be explained by the cost-push processes derived from the world oil price changes.

Do Asian Countries Upgrade in Global Value Chains? A Novel Approach and Empirical Evidence

This paper examines the move into upstream and downstream global value chain (GVC) activities by 11 Asian countries. We use international input–output tables in combination with employment data and measure the number of workers in each country involved in manufactures GVC. Jobs are classified by business function based on occupational information, such as R&D, fabrication, logistics, sales and marketing. In most Asian countries, we find a faster employment increase in R&D and other support services relative to fabrication activities between 2000 and 2011. However, the participation in GVC and the pace of upgrading appears to differ substantially across Asian countries. We use a structural decomposition method to explore the role of trade, consumption and technological change in accounting for changes in countries' involvement in GVC.

Servicification in global value chains: Comparative analysis of selected Asian countries with OECD

AbstractThis paper investigates the trend of servicification in global value chains (GVCs). The degree of servicification is measured as the share of service value added in manufacturing exports. Service inputs are either from domestic market or from foreign countries, which are measured by the domestic servicification and the foreign servicification, respectively. Using the international input–output tables from 1995 to 2011, we estimate the degree of servicification across 61 countries with a focus on Asian nations which have been rarely studied in previous research. We observed an evident trend of servicification in manufacturing in the Asian countries, especially in the 16 countries associated with Regional Comprehensive Economic Partnership (RCEP). Asian countries tend to have a lower level of domestic servicification but a higher level of foreign servicification than OECD countries. We also identified five key factors in driving the trend of servicification. Countries with broader participation and lower positions in GVCs tend to have higher levels of foreign servicification in manufacturing. Improvements in information and communication technology (ICT) also raise the level of foreign servicification. However, countries with a larger supply of service workers, better regulation quality and less government governance have a higher level of domestic servicification in manufacturing.

Value added and participation in global value chains: The case of Spain

AbstractFollowing Koopman, Wang, and Wei and using the data and indicators derived from the international input–output tables of the World Input–Output Database, this paper addresses the participation of the Spanish economy and its sectors in global value chains (GVCs) during the period 1995–2011 and its implications for the value added content of trade. The analysis reveals the increasing integration of the country in GVCs and the heterogeneity between manufacturing and services in their vertical specialisation and their contribution to value added. This paper also explores the link between the use of foreign factors and export performance at the industry level and finds that this type of involvement in GVCs is positively correlated with increases in the domestic value added content of Spanish exports.

PERAN INDONESIA DALAM RANTAI NILAI GLOBAL PRODUK ELEKTRONIK

Globalization has transformed the structure of industry into global integration of socalled global value chains (GVCs). Some literatures suggest that electronic industry is known as a successful industry in establishing global value chain. Electronic industry is one of leading cluster in driving economic growth in Indonesia. This study aimed to analyze the role of Indonesia in electronic global value chain according to its share towards global electronic industry, linkages, and value added distribution. An input output analysis by using the Asian International Input Output Table 2005 was employed to analyze the share of each country in electronic global value chain, inter-sector linkages, value added, also output and income multiplier. The result showed that Indonesia had low participation in electronic global value chain. Indonesia’s output share was the lowest among all countries which resulted in low valueadded acquisition. Indonesia played the role as the input user from the various sectors. It is suggested that Indonesia electronic manufacture sector should be integrated with the input supplier sectors. Electronic computing equipment sector can be the main priority in enhancing Indonesia electronic manufacture sector since it has the biggest effect to economic growth. Keywords: electronic, global value chain, Indonesia, input output analysis

PERAN INDONESIA DALAM RANTAI NILAI GLOBAL PRODUK ELEKTRONIK

Globalization has transformed the structure of industry into global integration of socalled global value chains (GVCs). Some literatures suggest that electronic industry is known as a successful industry in establishing global value chain. Electronic industry is one of leading cluster in driving economic growth in Indonesia. This study aimed to analyze the role of Indonesia in electronic global value chain according to its share towards global electronic industry, linkages, and value added distribution. An input output analysis by using the Asian International Input Output Table 2005 was employed to analyze the share of each country in electronic global value chain, inter-sector linkages, value added, also output and income multiplier. The result showed that Indonesia had low participation in electronic global value chain. Indonesia’s output share was the lowest among all countries which resulted in low valueadded acquisition. Indonesia played the role as the input user from the various sectors. It is suggested that Indonesia electronic manufacture sector should be integrated with the input supplier sectors. Electronic computing equipment sector can be the main priority in enhancing Indonesia electronic manufacture sector since it has the biggest effect to economic growth. Keywords: electronic, global value chain, Indonesia, input output analysis