Measuring trade in value added: how valid is the proportionality assumption?

    Research output: Contribution to journalArticle

    Abstract

    For countries that have only aggregate (‘competitive type’) input–output (IO) tables, value added in exports is commonly estimated using the ‘proportionality assumption’ to separate imported-inputs from domestically procured inputs. We test the validity of this assumption using non-competitive type IO tables, which contain separately compiled domestic- and imported-input matrices, for Indonesia, Thailand, Malaysia, Taiwan, and Australia. The results show that the proportionality assumption leads to an overestimation of domestic value-added in exports, and that the magnitude of the bias becomes amplified when the export composition of a country shifts from primary products to manufactured goods through integration into global production networks.
    Original languageEnglish
    Pages (from-to)292-300
    JournalEconomic Systems Research
    Volume35
    Issue number2
    DOIs
    Publication statusPublished - 2021

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