Skill distribution and comparative advantage: a comparison of China and India

This paper empirically examines the different comparative advantages of two emerging economic giants, China and India, in relation to the different skill distribution patterns in each country. By utilizing industry export data on China and India from 1983 to 2000, we find that a country with a greater dispersion of skills (i.e., India, especially in the earlier years) has higher exports in industries with shorter production chains, whereas a country with a more equal dispersion of skills (i.e., China, especially in the later years) is found to have higher exports in industries with longer production chains. The causal relationship is fairly robust across different specifications. This empirical evidence supports our assumption that the likely mechanism for these results is the negative impact of low-skilled workers on input quality, which accumulates and becomes larger as the length of production chains and the proportion of low-skilled workers in the economy increase.

Do electricity supply constraints matter for comparative advantage? : a neoclassical approach

This paper examines the extent to which electricity supply constraints could affect sectoral specialization. For this purpose, an empirical trade model is estimated from 1990-2008 panel data on 15 OECD countries and 12 manufacturing sectors. We find that along with Ricardian technological differences and Heckscher-Ohlin factor-endowment differences, productivity-adjusted electricity capacity drives sectoral specialization in several sectors. Among them, electrical equipment, transport equipment, machinery, chemicals, and paper products will see lower output shares as a result of decreases in productivity-adjusted electricity capacity. Furthermore, our dynamic panel estimation reveals that the effects of Ricardian technological differences dominate in the short-run, and factor endowment differences and productivity-adjusted electricity capacity tend to have a significant effect in only the long-run.

Using the input-output approach to measure participation in GVCs : the case of Costa Rica

In order to illustrate how the input-output approach can be used to explore various aspects of a country's participation in GVCs, this paper applies indicators derived from the concept of trade in value-added (TiVA) to the case of Costa Rica. We intend to provide developing countries that seek to foster GVC-driven structural transformation with an example that demonstrates an effective way to measure progress. The analysis presented in this paper makes use of an International Input-Output Table (IIOT) that was constructed by including Costa Rica's first Input-Output Table (IOT) into an existing IIOT. The TiVA indicator has been used to compare and contrast import flows, export flows and bilateral trade balances in terms of gross trade and trade in value-added. The country's comparative advantage is discussed based on a TiVA-related indicator of revealed comparative advantage. The paper also decomposes the domestic content of value added in each sector and measures the degree of fragmentation in the value chains in which Costa Rica participates, highlighting the partner countries that add the most value.

Does Quality Matter in the Iron and Scrap Trade?

This paper sheds light on the iron and steel (IS) scrap trade to examine how economic development affects the quality demanded of recyclable resource. A simple model is presented that show a mechanism of how scrap quality impacts the direction of trade due to comparative advantage. We find that economic development in both importing and exporting countries has a positive effect on the quality of traded recyclables. Developed countries that intend to improve the domestic recovery of recyclables should raise the quality of separating recyclables while developing countries should tighten environmental regulations to help decrease the import of recyclables that cause pollution.

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.

Political crisis and suspension of duty-free access in Madagascar : assessment of impacts on the garment industry

The export-oriented garment industry in Madagascar has displayed robust growth, thus both contributing to the economy and creating formal employment opportunities. However, it experienced a critical situation after the political turmoil that occurred in 2009. Our investigation using the trade data demonstrates that suspension of duty-free access to the US market (AGOA) resulting from the turmoil had a greater impact on exports, 64%–78% reduction, than the turmoil itself. Our original factory-level data demonstrates that AGOA suspension increased the probability of closure by 57.8% for the factories supplying exclusively to US market, and reduced 6405 jobs for low-skilled positions during the post turmoil period. The factory-level adverse impacts are much less than those on export value at the industry level because of the maintained duty-free access to EU, which has provided an alternative market. It suggests that if EU also had cancelled duty-free access, adverse impacts would have been enormous. Given the general pattern of comparative advantage in low-income countries, unplanned cancellation of duty-free access for them hurts labor-intensive industries and low-skilled workers.

China's inter-regional spillover of carbon emissions and domestic supply chains

In this study, we apply the inter-regional input–output model to explain the relationship between China’s inter-regional spillover of CO2 emissions and domestic supply chains for 2002 and 2007. Based on this model, we propose alternative indicators such as the trade in CO2 emissions, CO2 emissions in trade, regional trade balances, and comparative advantage of CO2 emissions. The empirical results not only reveal the nature and significance of inter-regional environmental spillover within China’s domestic regions but also demonstrate how CO2 emissions are created and distributed across regions via domestic production networks. The main finding shows that a region’s CO2 emissions depend on not only its intra-regional production technique, energy use efficiency but also its position and participation degree in domestic and global supply chains.

Heckscher-Ohlin : evidence from virtual trade in value added

The fragmentation of production chains across borders is one of the most distinctive feature of the last 30 years of globalization. Nonetheless, our understanding of its implications for trade theory and policy is only in its infancy. We suggest that trade in value added should follow theories of comparative advantage more closely than gross trade, as value-added flows capture where factors of production, e.g. skilled and unskilled labor, are used along the global value chain. We find empirical evidence that Heckscher-Ohlin theory does predict manufacturing trade in value-added, and it does so better than for gross shipment flows. While countries exports across a broad range of sectors, they contribute more value-added in techniques using their abundant factor intensively.