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

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

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)?

Motivation (3): NMS production and trade structure
Figure: Imports, exports and output
Figure: Share of intermediates in exports and imports

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.

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)

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)

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)

National U vs Global U
Figure: Global vs country-level upstreamness
Source: own calculations using WIOD data.

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

Global U: ongoing fragmentation and growth of
manufacturing
Figure: Global and sectoral U. Shares in global output
Source: own calculations using WIOD data.

Manufacturing vs Overall Economies
Figure: Overall U (L) vs U for manufacturing (R)
Source: own calculations using WIOD data.

Imports vs exports
Figure: U weighted by exports and imports
Source: own calculations using WIOD data.

U of imports across sources
Figure: U of imports across sources
Source: own calculations using WIOD data.

Evolution of manufacturing structures
Figure: Evolution of industry shares for NMS
Source: own calculations using WIOD data.

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

Selected sectors (with high output shares)

Across NMS...
Figure: U of the NMS (export-weighted)
Source: own calculations using WIOD data.

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?

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.