faculty of economics

and business

World Input-Output Tables and Competitiveness

Marcel Timmer (University of Groningen)

Prepared for panel at Fifth World KLEMS meeting, Cambridge, June 4-5, 2018

Source:Calculations based on WIOD.

The disintegration of industries

A – Cost share of final production stage

Notes: Kernel distribution plots of cost shares in final output. Shares calculated according to Equation

(4). Observations have been included for 240 manufactures value chains, identified by 12 manufacturing

industries of completion in 20 countries.

OLD: Traditional view on production (one stage):

Value added = F [KA , LA]

NEW: Task-based approach (multi stage):Vertically integrated production function where a product is the end-result of a series of tasks T (e.g. R&D, marketing, assembly, logistics)

Final output = G [T1 ; T2 ; …..; Tz]

The tasks can be carried out by varying combinations of labour and capital, in any country (Autor and Acemoglu, 2011).

Final output = H [T1(KA, LA); T2(KB, LB) ;…….; Tz(KN, LN) ]

Factors are located around the world and earn income “global value chain”

Unresolved issue: how to define tasks?

The Tasks in Global Value Chain approach

Tasks in a GVC (defined by occupations of workers): Illustration

Source: De Vries,

Miroudot and

Timmer (2018)

Tasks in exports

Tasks in exports

(Revealed) Comparative Advantage looks rather different from a task-perspective

Table 1 RCA based on value added, Chemical products

Industries Value

added

Fabr

task

R&D

task

Mgmt

task

Mark

task

China 1.15 2.02 0.35 0.36 1.08

France 1.10 0.88 1.47 0.75 1.01

Japan 0.88 0.99 0.47 0.16 0.77

Korea 1.19 1.23 0.57 0.31 1.29

US 1.02 0.54 0.75 1.12 0.90

Note: Exports of value added in Fabrication task (Fabr), Research and Development task (R&D),

Management (Mgmt) and Marketing (Mark). Highest entry in each row is in bold.

Tasks in exports

Measuring income to intangibles through GVC approach (Wen et al., 2018)

Figure 1 Global value chain decomposition

Purchaser's price

DISTRI-BUTION

Taxes Taxes

Value added

Intan Cap

Tan Cap

Basic price

Labour

FINAL STAGE

Value added

Intan Cap

Tan Cap

Labour

OTHER STAGES

Value added

Intan Cap

Tan Cap

0

Labour

Defining the (net) income to intangibles as a residual:

Final output minusGross cost of tangible capital minus

Labour costs

%-share in total value of final manufacturing products.

10.0

12.5

15.0

17.5

20.0

22.5

25.0

27.5

30.0

INTAN

TAN

INTAN

TAN

Income by intangible capital (INTAN) is twice the cost of tangible capital (TAN)

Note: the remainder is the labour share which is declining over this period

Final remarks: towards a task based model of production

From Value added = F [KA , LA]

To Final output = H [T1(KA, LA); T2(KB, LB) ;…….; Tz(KN, LN) ]

Open issues:

How to define tasks? As output from industries, occupations, business functions,….Are they measurable?

How to identify the “GVC”: what tasks belong together?

Production factors and final output are measurable: how to link tasks to particular sets of production factors?

NB Old tools from productivity literature still useful!

• Los, B., M. P. Timmer and G. J. de Vries (2016), “Tracing Value-Added and Double Counting in Gross Exports: Comment”, American Economic Review, 106(7), 1958-66.

• Timmer, M.P., B.Los, R.Stehrer and G.J. de Vries (2013). “Fragmentation, Incomes and Jobs. An Analysis of European Competitiveness.” Economic Policy, 28(76), 613–661.

• Los, B., M.P. Timmer and G.J. de Vries (2015), “How Global are Global Value Chains? A New Approach to Measure International Fragmentation”, Journal of Regional Science, 55(1), 66-92.

• Timmer, M.P., A.A. Erumban, B. Los, R. Stehrer and G.J. de Vries (2014),"Slicing Up Global Value Chains", Journal of Economic Perspectives, 28(2), 99-118.

• Timmer, M.P., E. Dietzenbacher, B. Los, R. Stehrer and G.J. de Vries (2015),“An Illustrated User Guide to the World Input-Output Database: the Case of Global Automotive Production”. Review of International Economics, 23(3), 575-605.

• Timmer, M.P., B. Los, R. Stehrer and G.J. de Vries (2016), “An Anatomy of the Global Trade Slowdown based on the WIOD 2016 Release”, GGDC research memorandum number 162, University of Groningen.

• Los, B and Marcel P. Timmer (2018), “Measuring Bilateral Exports of Value Added: A Unified Approach and Application”, paper presented at CRIW/NBER, March 2018.

• Chen, Wen & Bart Los & Marcel Timmer, 2017. "Measuring the Returns to Intangibles: A Global Value Chain Approach," paper presented at CRIW/NBER, March 2017. NBER Chapters,in: Measuring and Accounting for Innovation in the 21st Century National Bureau of Economic Research, Inc.

• Vries, G.J. de, S. Miroudot and M.P. Timmer (2018), Functional Specialisation in Trade, mimeo

• Reijnders, L.S.M, X. Ye and M.P. Timmer (2017), “Biased Technical Change Through the Lens of Global Value Chains”, GGDC research memorandum number 164, University of Groningen.

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