Production Networks and Spatial Economic Interdependence: An International Input-Output Analysis of the Asia-Pacific Region

The Asia-Pacific Region has enjoyed remarkable economic growth in the last three decades. This rapid economic growth can be partially attributed to the global spread of production networks, which has brought about major changes in spatial interdependence among economies within the region. By applying an Input-Output based spatial decomposition technique to the Asian International Input-Output Tables for 1985 and 2000, this paper not only analyzes the intrinsic mechanism of spatial economic interdependence, but also shows how value added, employment and CO2 emissions induced are distributed within the international production networks.

Input-output-based genuine value added and genuine productivity in China's industrial sectors (1995-2010)

The rapid growth of China's economy has brought about huge losses of natural capital in the form of natural resource depletion and damages from carbon emissions. This paper recalculates value added, capital formation, capital stock, and related multifactor productivity in China's industrial sectors by further developing the genuine savings method of the World Bank. The sector-level natural capital loss was calculated using China's official input–output table and their extensions for tracing final consumers. The capital output elasticity in the productivity estimation was adjusted based on these tables. The results show that although the loss of natural capital in China's industrial sectors in terms of value added has slowed, the impacts on their productivity during the past decades is still quite clear.

Adjustment methods of national input-output tables for harmonized and consistent multi-regional input-output databases

Despite the fact that input–output (IO) tables form a central part of the System of National Accounts, each individual country's national IO table exhibits more or less different features and characteristics, reflecting the country's socioeconomic idiosyncrasies. Consequently, the compilers of a multi-regional input–output table (MRIOT) are advised to thoroughly examine the conceptual as well as methodological differences among countries in the estimation of basic statistics for national IO tables and, if necessary, to carry out pre-adjustment of these tables into a common format prior to the MRIOT compilation. The objective of this study is to provide a practical guide for harmonizing national IO tables to construct a consistent MRIOT, referring to the adjustment practices used by the Institute of Developing Economies, JETRO (IDE-JETRO) in compiling the Asian International Input–Output Table.

A New Measurement for International Fragmentation of the Production Process: An International Input-Output Approach

The paper investigates the possibility of constructing a new measurement for analysing international fragmentation of the production process. It asserts that the current usage of relevant data, whether the trade shares of parts and components or the index of Vertical Specialisation, is quite unsatisfactory for measuring the phenomenon, since they critically lack the overall perspective of the entire structure of production chains. 　The new measurement is formulated such that it captures every aspect of the vertical sequence of production linkages. It is based on the input-output model of Average Propagation Lengths, recently developed by Eric Dietzenbacher and others, which show the average number of production stages that are passed through for an exogenous change in one industry to affect another. By applying this model to the data of the Asian International Input-Output Tables, the index is able to measure the international dimension of production sharing and division of labour in East Asia.

Input-Output Based Economic Impact Evaluation System for Small City Development: A Case Study on Saemangeum's Flux City Design

The paper aims to develop a quasi-dynamic interregional input-output model for evaluating the macro-economic impacts of small city development. The features of the model are summarized as follows: (1) the consumption expenditure of households is regarded as an endogenous variable, (2) the technological change is determined by the change of industrial Location Quotient caused by firm's investment activities. (3) a strong feedback function between the city design and the economic analysis is provided. For checking the performance of the model, Saemangeum's Flux City Design Plan is used as the simulation target in our paper.

Shock Transmission Mechanism of the Economic Crisis in East Asia : An Application of International Input-Output Analysis

This paper investigates the impacts of the 2008 economic crisis on industries in East Asia. By using the updated Asian international input-output table for 2008, the paper attempts to identify the transmission mechanism and the magnitude of impact of the crisis on industries in East Asia. The analyses reveal that the crisis significantly affected industrial output of the nine East Asian countries. In particular, the countries which are deeply involved in production networks were affected most seriously. Moreover, the analyses show that the impact was transmitted to East Asian industries considerably through the “triangular trade”, in which China imports parts and components from neighboring East Asian countries and then exports final products to the U.S. and EU markets.

Mapping agricultural value chains with international input-output data

In recent years, the analysis of trade in value added has been explored by many researchers. Although they have made important contributions by developing GVC-related indices and proposing techniques for decomposing trade data, they have not yet explored the method of value chain mapping—a core element of conventional value chain analysis. This paper introduces a method of value chain mapping that uses international input-output data and reveals both upstream and downstream transactions of goods and services induced by production activities of a specific commodity or industry. This method is subsequently applied to the agricultural value chain of three Greater Mekong Sub-region countries (i.e., Thailand, Vietnam, and Cambodia). The results show that the agricultural value chain has been increasingly internationalized, although there is still room for obtaining benefits from GVC participation, especially in a country such as Cambodia.

Measuring global value chains and regional economic integration : an international input-output approach

Firms that are expanding their cross-border activities, such as vertical specialization trade, outsourcing, and fragmentation productions, have brought dramatic changes to the global economy during the last two decades. In an attempt to understand the evolution of the interaction among countries or country groups, many trade-statistics-based indicators have been developed. However, most of these statistics focus on showing the direct trade-specific-relationship among countries, rather than considering the roles that intercountry and interindustrial production networks play in a global economy. This paper uses the concepts of trade in value added as measured by the input–output tables of OECD and IDE-JETRO to provide alternative indicators that show the evolution of regional economic integration and global value chains for more than 50 economies. In addition, this paper provides thoughts on how to evaluate comparative advantages on the basis of value added using an international input–output model.

China's regional economies and value chains : an interregional input-output analysis

Attempts to understand China’s role in global value chains have often noted the case of Apple's iPhone production, in particular the fact that the value added during the Chinese portion of the iPhone’s supply chain is no more than 4%. However, when we examine the Chinese economy as a whole in global production networks, China’s share in total induced value added by China’s exports of final products to the USA is about 75% in 2005. This leads us to investigate how Chinese value added is created and distributed not only internationally but also domestically. To elucidate the increasing complexity of China’s domestic production networks, this paper focuses on the measure of Domestic Value Chains (DVCs) across regions and their linkages with global markets. By using China’s 1997 and 2007 interregional input-output tables, we can understand in detail the structural changes in domestic trade in terms of value added, as well as the position and degree of participation of different regions within the DVCs.

Compilation, application and challenge of IDE-JETRO's International Input-Output tables

International input-output tables are among the most useful tools for economic analysis. Since these tables provide detailed information about international production networks, they have recently attracted considerable attention in research on spatial economics, global value chains, and issues relating to trade in value-added. The Institute of Developing Economies at the Japan External Trade Organization (IDE-JETRO) has more than 40 years of experience in the construction and analysis of international input-output tables. This paper explains the development of IDE-JETRO’s multi-regional input-output projects including the construction of the Asian International Input-Output table and the Transnational Interregional Input-Output table between China and Japan. To help users understand the features of the tables, this paper also gives examples of their application.

Undermined climate policies : a study on the impact of regulatory and financial discrimination across heterogeneous firms in China

Firms in China within the same industry but with different ownership and size have very different production functions and can face very different emission regulations and financial conditions. This fact has largely been ignored in most of the existing literature on climate change. Using a newly augmented Chinese input–output table in which information about firm size and ownership are explicitly reported, this paper employs a dynamic computable general equilibrium (CGE) model to analyze the impact of alternative climate policy designs with respect to regulation and financial conditions on heterogeneous firms. The simulation results indicate that with a business-as-usual regulatory structure, the effectiveness and economic efficiency of climate policies is significantly undermined. Expanding regulation to cover additional firms has a first-order effect of improving efficiency. However, over-investment in energy technologies in certain firms may decrease the overall efficiency of investments and dampen long-term economic growth by competing with other fixed-capital investments for financial resources. Therefore, a market-oriented arrangement for sharing emission reduction burden and a mechanism for allocating green investment is crucial for China to achieve a more ambitious emission target in the long run.

Interindustrial Structure in the Asia-Pacific Region: Growth and Integration, by Using 2000 AIO Table

Over the past 20 years Asian countries have achieved a certain degree of economic growth and at the same time deepened spatial interdependence. In January 2006, IDE completed the 2000 Asian International Input-Output Table, which covers eight major East Asian countries/regions as well as Japan and the United States. Given the dynamic changes in the economies of East Asia, this paper attempts to summarize the characteristics and their patterns of change in industrial structures and trade structures of the countries/regions in the Asia-Pacific region from the three viewpoints of time, space, and industry, by using the AIO table for 1985, 1990, 1995, and 2000.

Rules of Origin and Local Content in East Asia

Rules of Origin (RoO) are an integral part of all trade rules. In order to be eligible for Common Effective Preferential Tariffs (CEPT) under AFTA and similar arrangements under the ASEAN-China FTA, a product must satisfy the conditions relative to local content. The paper tries to calculate local content as well as cumulative local content in East Asian economies, with use of the Asian International Input-Output Tables; it also investigates factors of change in local content by applying decomposition analysis. The paper finds that the cumulation rule increased local content of the electronics industry more significantly than local content of the automotive industry, and the contribution of the cumulation rule increased in the period 1990-2000, due to rising dependency on neighboring ASEAN countries and China.

Vertical specialisation indicator based on supply-driven input-output model

“Import content of exports”, based on Leontief’s demand-driven input-output model, has been widely used as an indicator to measure a country’s degree of participation in vertical specialisation trade. At a sectoral level, this indicator represents the share of inter-mediates imported by all sectors embodied in a given sector’s exported output. However, this indicator only reflects one aspect of vertical specialisation – the demand side. This paper discusses the possibility of using the input-output model developed by Ghosh to measure the vertical specialisation from the perspective of the supply side. At a sector level, the Ghosh type indicator measures the share of imported intermediates used in a sector’s production that are subsequently embodied in exports by all sectors. We estimate these two indicators of vertical specialisation for 47 selected economies for 1995, 2000, 2005 using the OECD’s harmonized input-output database. In addition, the potential biases of both indicators due to the treatment of net withdrawals in inventories, are also discussed.

How are global value chains fragmented and extended in China's domestic production networks?

Global value chains are supported not only directly by domestic regions that export goods and services to the world market, but also indirectly by other domestic regions that provide parts, components, and intermediate services to final exporting regions. In order to better understand the nature of a country’s position and degree of participation in global value chains, we need to more fully examine the role of individual domestic regions. Understanding the domestic components of global supply chains is especially important for large developing countries like China and India, where there may be large variations in economic scale and development between domestic regions. This paper proposes a new framework for measuring domestic linkages to global value chains. This framework measures domestic linkages by endogenously embedding a country’s domestic interregional input-output (IO) table in an international IO model. Using this framework, we can more clearly describe how global production is fragmented and extended through linkages across a country’s domestic regions. This framework will also enable us to estimate how value added is created and distributed in both domestic and international segments of global value chains. For examining the validity and usefulness of this new approach, some numerical results are presented and discussed based on the 2007 Chinese interregional IO table, China customs statistics at the provincial level, and World Input-Output Tables (WIOTs).