Journal of Economic Perspectives: Vol. 28 No. 2 (Spring 2014)

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Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research

Article Citation

Johnson, Robert C. 2014. "Five Facts about Value-Added Exports and Implications for Macroeconomics and Trade Research." Journal of Economic Perspectives, 28(2): 119-42.

DOI: 10.1257/jep.28.2.119

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. These differences are large and growing over time, currently around 25 percent, and manufacturing trade looks more important, relative to services, in gross than value-added terms. These differences are also heterogenous 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 macroeconomic 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 on trade; the role of endowments and comparative advantage; and trade policy.

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Authors

Johnson, Robert C. (Dartmouth College)

JEL Classifications

F11: Neoclassical Models of Trade
F14: Empirical Studies of Trade
F23: Multinational Firms; International Business
L16: Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
L23: Organization of Production

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