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.

Empirical global value chain analysis in electronics and automobile industries :An application of Asian international input-output tables

This study aims to examine the international value distribution structure among major East Asian economies and the US. The mainstream trade theory explains the gains from trade; however, global value chain (GVC) approach emphasises uneven benefits of globalization among trading partners. The present study is mainly based on this view, examining which economy gains the most and which the least from the East Asian production networks. Two key industries, i.e., electronics and automobile, are our principle focus. Input-output method is employed to trace the creation and flows of value-added within the region. A striking fact is that some ASEAN economies increasingly reduce their shares of value-added, taken by developed countries, particularly by Japan. Policy implications are discussed in the final section.

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.

The role of Preferential Trade Agreements (PTAs) in facilitating global production networks

This paper examines the effects of preferential trade agreements (PTAs) in facilitating international trade flows connecting production networks. We consider over 250 PTAs with trade flows distinguished into parts and components and final goods for the period 1979-2008. The gravity equation estimates suggest that the concurrent year effects of PTA formation on trade in parts and components are unseen, whereas PTAs have positive and pervasive effects on both types of trade flows 6 and 9 years after the PTA formation.

Chapter 1 Economic Integration and Industry Location: Theories, Empirical Results, and Implications for CLMV

Trade affects the internal location of industry in two ways: it induces firms to specialize and it expands the set of markets that firms serve. If there are industry-specific external economies, firms in related industries will spatially agglomerate (Hanson 1996a). In the context of economic integration, diminished barriers to trade affect industry location particularly in less developed countries. As described below, regional agreements in North America and Europe have caused frontier regions to expand. These regions, which include border regions and port cities, have advantages over internal regions in terms of access to foreign markets. Since trade liberalization induces many firms in developing countries to participate in production networks and to specialize in labor-intensive activities such as assembling and processing of foreign-made components, their inputs as well as final products need to be carried across borders. Therefore, the best industry location, one that minimizes transport costs, is likely to shift to frontier regions. In East Asia, China has developed rapidly since it opened up to international trade. Simultaneously, a large amount of foreign direct investment (FDI) has been attracted and industry agglomerations have been formed in coastal regions, that is, frontier regions linked to the global market by sea, leaving many internal regions behind. Similarly, Cambodia, Laos, Myanmar, and Vietnam (CLMV) have joined AFTA and/or the WTO and liberalized international trade since the 1990s. Moreover, transport infrastructures such as the East-West Economic Corridor, the Southern Economic Corridor, and the North-South Economic Corridor have been built and narrowed economic distances in the Greater Mekong Subregion (GMS). As a result, frontier regions are likely to increase their location advantages and lure labor-intensive operations from neighboring countries. It is expected that, as has happened in North America and Europe, economic integration in East Asia will significantly affect internal geography in CLMV. In this study, I first review theories relevant to economic integration and industry location within a country. In particular, emphasis is placed on the new economic geography (NEG). Secondly, empirical results for North America and Europe are surveyed since they have preceded East Asia in regional integration and a substantial number of studies have been conducted on these regions. The final section summarizes and discusses implications for internal geography in CLMV.

Non-economic voting and incumbent strength in Turkey

Evidence suggests that incumbent parties find it harder to be re-elected in emerging than in advanced democracies because of more serious economic problems in the former. Yet the pro-Islamic Justice and Development Party (AKP) has ruled Turkey since 2002. Does economic performance sufficiently account for the electoral strength of the AKP government? Reliance on economic performance alone to gain public support makes a government vulnerable to economic fluctuations. This study includes time-series regressions for the period 1950-2011 in Turkey and demonstrates that even among Turkey's long-lasting governments, the AKP has particular electoral strength that cannot be adequately explained by economic performance.

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).

Five growth strategies for Myanmar : re-engagement with the global economy

After decades of isolation, Myanmar is now actively re-engaging with the global economy. For successful re-engagement, Myanmar needs to implement comprehensive economic reforms based on a shared vision for long-term economic development that is characterized by human-centered, high, sustainable, pro-poor, inclusive, and balanced economic growth. In this paper, we propose five growth strategies: "Agriculture Plus Plus," an export-oriented strategy, a foreign direct investment-driven strategy, a two-polar growth strategy, and a strategy to develop domestic economic corridors. These strategies are used as guides to translate these development agendas into a set of implementable policies, programs, and projects.

Platforms and firm capabilities : a study of emerging global value chains

This paper discusses globalization’s impact on production and distribution systems in emerging economies. On one hand, globalization has resulted in an increasing number of multinational corporations to adopt a platform strategy for their customers in emerging markets. On the other hand, developing countries have witnessed the integration of an increasing number of traditional marketplaces into a powerful distribution system, characterized as a specialized market system. Consequently, an unique industrial organization has developed in emerging economies, regarded as emerging global value chains (EGVCs). They comprise a large number of small firms together with a small number of large platform providers and display the "market" type general governance patterns. Firms in EGVCs are more likely to realize functional upgrading and grow into strong lead firms.

Establishing global value chains through the liberalization of trade in services

This paper addresses the importance of establishing global value chains through the liberalization of trade in services. A database has revealed rather disconnected policy arrangements across APEC members in terms of service trade liberalization. While the economic benefits arising from harmonized and liberalized policy across APEC members are widely recognized in the business sector, relevant policy coordination seems to be missing. With this in mind, APEC could work on establishing its own harmonized "service trade commitment table" that would be centered on simple foreign capital participation criteria. This would surely contribute to forming an APEC-wide global value chain.

Measuring smile curves in global value chains

The concept and logic of the "smile curve" in the context of global value chains has been widely used and discussed at the individual firm level, but rarely identified and investigated at the country and industry levels by using real data. This paper proposes an idea, based on an inter-country input-output model, to consistently measure both the strength and length of linkages between producers and consumers along global value chains. This idea allows for better identification and mapping of smile curves for countries and industries according to their positions and degrees of participation in a given conceptual value chain. Using the 1995-2011 World Input-Output Tables, several conceptual value chains are investigated, including exports of electrical and optical equipment from China and Mexico and exports of automobiles from Japan and Germany. The identified smile curves provide a very intuitive and visual image, which can significantly improve our understanding of the roles played by different countries and industries in global value chains. Further, the smile curves help identify the benefits gained by these countries and industries through their participation in global trade.

Compilation of a regionally-extended inter-country input-output table and its application to global value chain analysis

Studies on the rise of global value chains (GVCs) have attracted a great deal of interest in the recent economics literature. However, due to statistical and methodological challenges, most existing research ignores domestic regional heterogeneity in assessing the impact of joining GVCs. GVCs 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. To better understand the nature of a country's position and degree of participation in GVCs, we need to fully examine the role of individual domestic regions. Understanding the domestic components of GVCs is especially important for larger economies such as China, the US, India and Japan, where there may be large variations in economic scale, geography of manufacturing, and development stages at the domestic regional level. This paper proposes a new framework for measuring domestic linkages to global value chains. This framework measures domestic linkages by endogenously embedding a target country's (e.g. China and Japan) domestic interregional input–output tables into the OECD inter-country input–output model. Using this framework, we can more clearly understand how global production is fragmented and extended internationally and domestically.