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Up or down the value chain? A comparative analysis of the GVC position of the economies of the NMS

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Presentation at the Macromodels conference in 2014. Paper by Jan Hagemejer & Mahdi Ghodsi

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Up or down the value chain? A comparative analysis of the GVC position of the economies of the NMS

  1. 1. Up or down the value chain? A comparative analysis of the GVC position of the economies of the NMS Jan Hagemejer 1 & Mahdi Ghodsi 2 1 NBP & University of Warsaw 2 WIIW & UoW Funded by NSC grant no 2013/09/D/HS4/01519 November 20, 2014
  2. 2. Motivation: NMS production shares Source: WIOD NMS maintain a high share of manufacturing in total output... ...despite ongoing growth in the service sector The NMS are the backbone of the German manufacturing
  3. 3. Motivation (2): NMS trade partners shares Figure: Trade structure Source: WIOD European integration has brought a relative increase of intra-NMS trade... ... but the fragmentation and globalization processes have boosted imports and exports from/to China and RoW International trade in substitutes or complements (competition vs cooperation)?
  4. 4. Motivation (3): NMS production and trade structure Figure: Imports, exports and output Figure: Share of intermediates in exports and imports
  5. 5. Questions and answers Q: What is the overall position of the NMS in the global value chain (GVC)? Q: Do NMS compete with China and other emerging markets or the EU15? Q: What is the sectoral composition of output that determines the position of countries in the GVC? A: (Relatively) new data sources A: The upstreamness measure - the distance from nal demand. This work is an INPUT to a larger project.
  6. 6. Upstreamness measure (1) Antras, Chor, Fally, and Hillberry [2012]: Output of sector is a sum of the nal and intermediate demand Yi = Xi + N j=1 zij Yj Substituting recursively: Yi = Xi + N j=1 zij Xj + N j=1 N k=1 zij zjk Xj + N j=1 N k=1 N l=1 zij zjk zkl Xj + · · · Each element corresponds to one production stage. The distance from nal demand is dened as a weighted average: ui = 1· Xi Yi +2· N j=1 zij Xj Yi +3· N j=1 N k=1 zij zjk Xj Yi +4· N j=1 N k=1 N l=1 zij zjk zkl Xj Yi +· · · (if only nal demandui = 1)
  7. 7. Upstreamness measure (2) Fally [2011] shows, that: ui = 1+ N j=1 δij uj (where δij = zij Yj Yi , and in matrix form: U − ∆U = 1 , whereU to is a vector N × 1 ui , ∆ is a N × N matrix, where(i, j)-th element is δij = zij Yj Yi ). Therefore: U = [I − ∆] −1 1 Closed economy model (National U): Antras et al. [2012] use national IO matrices and assume that δij = zij Yj +EXij −IMij Yi = EXij EXi = IMij IMi = zij Yj Yi . Thanks to WIOD we can treat the world as one closed economy (Global U)
  8. 8. World input-output database 1435x1435 input-output matrix: nal demand and its sources in each country intermediate demand across sectors AND countries for each sector AND country 35 sectors (NACE/CPA) 40 countries and RoW (UE, OECD)
  9. 9. National U vs Global U Figure: Global vs country-level upstreamness Source: own calculations using WIOD data.
  10. 10. National U vs Global U ln_res1 ln_res2 ln_res3 ln_res4 ln_res5 High_income 0.0266*** 0.0146*** (0.0025) (0.0026) NMS -0.00481 -0.0223*** (0.0027) (0.0029) EU15 -0.0188*** -0.0309*** (0.0025) (0.0026) China -0.218*** -0.205*** (0.0069) (0.0069) US -0.00804 0.0100 (0.0066) (0.0067) openness 0.0986*** 0.0888*** 0.0987*** (0.0056) (0.0059) (0.0062) constant -0.0366*** -0.00211 -0.0547*** -0.0622*** -0.0329*** (0.0022) (0.0018) (0.0024) (0.0028) (0.0026) N 23056 23056 23056 23056 23056
  11. 11. Global U: ongoing fragmentation and growth of manufacturing Figure: Global and sectoral U. Shares in global output Source: own calculations using WIOD data.
  12. 12. Manufacturing vs Overall Economies Figure: Overall U (L) vs U for manufacturing (R) Source: own calculations using WIOD data.
  13. 13. Imports vs exports Figure: U weighted by exports and imports Source: own calculations using WIOD data.
  14. 14. U of imports across sources Figure: U of imports across sources Source: own calculations using WIOD data.
  15. 15. Evolution of manufacturing structures Figure: Evolution of industry shares for NMS Source: own calculations using WIOD data.
  16. 16. Structure of manufacturing Table: Structure of NMS manufacturing in 2011 Sector Share in output Share in exports Leather, Leather and Footwear 0,6% 1,0% Wood and Products of Wood and Cork 3,0% 2,0% Textiles and Textile Products 3,0% 4,0% Manufacturing, Nec; Recycling 3,7% 4,3% Other Non-Metallic Mineral 4,1% 2,0% Pulp, Paper, Paper , Printing and Publishing 4,7% 2,6% Rubber and Plastics 5,5% 5,5% Chemicals and Chemical Products 6,4% 8,1% Coke, Rened Petroleum and Nuclear Fuel 6,9% 4,4% Machinery, Nec 7,6% 9,7% Electrical and Optical Equipment 11,8% 19,0% Basic Metals and Fabricated Metal 13,2% 11,9% Transport Equipment 14,0% 18,8% Food, Beverages and Tobacco 15,4% 6,7% Source: own calculations using WIOD
  17. 17. Selected sectors (with high output shares)
  18. 18. Across NMS... Figure: U of the NMS (export-weighted) Source: own calculations using WIOD data.
  19. 19. The pipeline Local or global trend of U (relative U) U as a determinant of bilateral value added trade ows Upstreamness vs domestic VA in exports - how does the relative position in the GVC translate to domestic VA creation? Upstreamness vs knowledge spillovers from FDI - do technology spillovers depend on the distance from nal demand?
  20. 20. Bibliography Pol Antras, Davin Chor, Thibault Fally, and Russell Hillberry. Measuring the Upstreamness of Production and Trade Flows. American Economic Review, 102(3):41216, May 2012. Thibault Fally. On the fragmentation of production in the us. University of Colorado mimeo, 2011.

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