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Up or down the value chain? The comparative analysis of the GVC position of the economies of the new EU member

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A presentation by Mahdi Ghodsi at the ETSG conference in 2014.

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Up or down the value chain? The comparative analysis of the GVC position of the economies of the new EU member

  1. 1. Up or down the value chain? The comparative analysis of the GVC position of the economies of the new EU member Jan Hagemejer University of Warsaw and National Bank of Poland Mahdi Ghodsi University of Warsaw and Universita Cattolica del Sacro Cuore ETSG Conference Munich, Germany September 13, 2014
  2. 2. Agenda 1.  Introduction and Motivation 2.  The upstreamness measure 3.  The upstreamness of the New Member States 4.  Conclusions
  3. 3. 1- Introduction and Motivation •  Trade Liberalization, Fragmentation, and Technology Absorption
  4. 4. 1- Introduction and Motivation •  Imports of NMS
  5. 5. 1- Introduction and Motivation •  Exports of NMS
  6. 6. 1- Introduction and Motivation •  Faster growth rate of intermediates imports than the growth of final goods
  7. 7. 1- Introduction and Motivation •  Using WIOD database, the study on NMS is focusing on the following issues: 1.  Stylized facts on the liberalization processes 2.  Disentanglement of structural changes 3.  Evolution of trade in final vs intermediate goods 4.  Calculation and analysis over upstreamness
  8. 8. 2- The upstreamness measure •  Output upstreamness elaborated by Antras et al. (2012): how effective the production in one sector is in the production of other sectors to be finally reached to the final consumption by households, government and investors (HGI). •  In order to find out how much a product is upstream, we can use a framework to calculate the stages within which a product is used as direct or indirect input of production supply chain to finally reach WGI as final consumption. •  Two approaches for calculation: 1.  Treating the whole world as one closed economy (Miller et al., 2013) 2.  Calculation within each country considering trade flows (Antras et al., 2012) •  Advantages of first approach: 1.  No simplifying assumption that the shares of intermediate products in production are equal to the shares of these products in exports and imports across countries 2.  First approach shows the distance from global final demand – good for global comparison 3.  Distinguishing between interindustry and intraindustry trade
  9. 9. 2- The upstreamness measure Table 1: Differences between the two measures   Dep: residuals   1   2   3   4   5   High_income   0,0266***       0,0146***       (0,0025)       (0,0026)                 CEEC     -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   R2   0,005   0,043   0,013   0,015   0,054   adj. R2   0,005   0,043   0,013   0,015   0,053   AIC   -19464,9   -20367,2   -19663,2   -19692,3   -20614,7   BIC   -19448,8   -20327,0   -19647,1   -19668,1   -20566,5   Standard errors in parentheses   * p < 0.05, ** p < 0.01, *** p < 0.001  
  10. 10. 2- The upstreamness measure •  Differences between the two approaches: •  Regression result over the difference of the two approaches: –  The higher the openness, the higher is the gap –  Underestimation of country level approach for liberalized countries –  This gap is very large in China
  11. 11. 2- The upstreamness measure •  Similar results of both approaches: –  Increasing global upstreamness due to fragmentations –  Very upstream sectors (raw or resources): mining, metal and chemical industry –  Very downstream (services): health and social services, education, real estate, hotels and restaurants etc. –  Not much increase in upstreamness of agriculture and construction –  Energy has shifted towards more downstream use
  12. 12. 2- The upstreamness measure
  13. 13. 2- The upstreamness measure •  Similar results of both approaches: –  Increasing global upstreamness due to fragmentations –  Very upstream sectors (raw or resources): mining, metal and chemical industry –  Very downstream (services): health and social services, education, real estate, hotels and restaurants etc. –  Not much increase in upstreamness of agriculture and construction –  Energy has shifted towards more downstream use
  14. 14. 2- The upstreamness measure
  15. 15. 3- The upstreamness of the NMS Overall upstreamness (left) vs upstreamness of manufacturing (right) •  Decreasing trend of NMS after 1999 is mainly because of Polish structure similarity to EU15’s •  Increasing share of services in output of NMS remains below that of EU15 •  Big jump observed in RoW is mainly due to China (new WTO member state) and East Asian countries
  16. 16. 3- The upstreamness of the NMS Overall upstreamness of Exports vs Imports •  The relatively more closed countries would naturally be more downstream due to the overall importance of domestic demand. •  Increasing overall trend in upstreamness of bothe exports and imports. •  Convergence of upstreamness between EU15 and NMS both in exports and in imports
  17. 17. 3- The upstreamness of the NMS Geographical Bilateral upstreamness •  NMS and EU15 convergence in GVC: –  Intra-NMS trade becomes more and more downstream –  EU15 and RoW exports to NMS become increasingly upstream (similar to aggregates) –  EU15 downstream imports from NMS and upstream imports from RoW –  Since 2000, no big difference between NMS and EU15 exports to RoW
  18. 18. 3- The upstreamness of the NMS NMS manufacturing export share Almost 50% of NMS output is supplied by fours sectors: “Food, Beverages and Tobacco” (over 15%), “Transport Equipment (14%)”, “Basic and Fabricated metals” (13%) and “Electrical and Optical Equipment” (12%)
  19. 19. 3- The upstreamness of the NMS Upstreamness of 4 major exporting sectors
  20. 20. 3- The upstreamness of the NMS Upstreamness manufacturing of NMS (export weighted)
  21. 21. 4- Conclusions •  Trade liberalization after transition of 1990’s assisted in structural changes of NMS •  Intermediates imports rather than exports •  Increasing trend of upstreamness globally •  NMS and EU15 Convergence in GVC •  Manufacturing as downstream, but becoming more upstream during time •  Future research: –  Analysing how the position in the value chain is related to the relative importance of domestic value added, technology transfer and related productivity gains
  22. 22. Thank  you  for  your   attention  

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