Slicing Up Global Value Chains
AbstractIn this paper, we "slice up the global value chain" using a decomposition technique that has recently become feasible due to the development of the World Input-Output Database. We trace the value added by all labor and capital that is directly and indirectly needed for the production of final manufacturing goods. The production systems of these goods are highly prone to international fragmentation as many stages can be undertaken in any country with little variation in quality. We seek to establish a series of facts concerning the global fragmentation of production that can serve as a starting point for future analysis. We describe four major trends. First, international fragmentation, as measured by the foreign value-added content of production, has rapidly increased since the early 1990s. Second, in most global value chains there is a strong shift towards value being added by capital and high-skilled labor, and away from less-skilled labor. Third, within global value chains, advanced nations increasingly specialize in activities carried out by high-skilled workers. Fourth, emerging economies surprisingly specialize in capital-intensive activities.
CitationTimmer, Marcel P., Abdul Azeez Erumban, Bart Los, Robert Stehrer, and Gaaitzen J. de Vries. 2014. "Slicing Up Global Value Chains." Journal of Economic Perspectives, 28 (2): 99-118. DOI: 10.1257/jep.28.2.99
- F23 Multinational Firms; International Business
- L16 Industrial Organization and Macroeconomics: Industrial Structure and Structural Change; Industrial Price Indices
- L23 Organization of Production
- M11 Production Management