Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research
Journal of Economics Perspectives, 28 (2), 2014
Abstract: Due to the rise of global supply chains, gross exports do not accurately measure the amount of value added exchanged between countries. I highlight five facts about differences between gross and value-added exports. The differences are large and growing for the world as a whole, and inflate the share of manufacturing in world trade. They are also heterogeneous across countries and bilateral partners, and changing unevenly across countries and partners over time. Taking these differences into account enables researchers to obtain better quantitative answers to important macroeconomics and trade questions. I discuss how the facts inform analysis of the transmission of shocks across countries, the mechanics of trade balance adjustments, the impact of frictions, endowments, and comparative advantage on trade, and trade policy.