Application of Hypothetical Extraction and Conventional Method in Measuring Value-added in Trade: Equivalence or Different Result?

Document Type : Research Paper

Authors

1 Faculty of Economics, Allameh Tabataba’i University

2 Professor of Allameh Tabatabai University

3 Department of Business Economics, Faculty of Economics, Allameh Tabatabai University

4 Professor, Department of Economics, Faculty of Social and Economic Sciences, AlZahra University

5 Allameh Tabatabaei University

Abstract

Two methods, the hypothetical extraction method and the conventional method, are used for measuring value added in trade. The former has three general steps in which the sum of the domestic value added (DVA) share and the vertical specialization (VS) share of gross exports is equal at the macroeconomic level, but not at the activity level. The latter, however, not only guarantees the macro level but can also be extended to the level of economic activities. Moreover, while the former has attracted the attention of researchers in Iran, the latter has been neglected. The main objective of this article is to fill this gap following the main question: Does the application of these two methods in measuring value added in trade have the same or different results? For this purpose, the latest input-output table of 2016 is used. The overall results show that, at the macro level, the results of the two methods are the same. Secondly, the results of the two methods show a different picture at the activity level, so that in the hypothetical extraction method the sum of DVA and VS at the activity level is greater or smaller than one, which makes the interpretation of the results and policy analysis difficult, whereas in the conventional method provides unique ratio, which makes the interpretation of the results and policy analysis possible at the activity level.

Keywords

Main Subjects

References

  • منابع

    • بانوئی، علی اصغر؛ شرکت، افسانه؛ بزازان، فاطمه؛ شاه­حسینی، سمیه و کیانی راد، آذین. (1402). مقایسه خطاهای آماری جداول نوع دوم و سوم و نسبت آن­ها با ارزش­افزوده در صادرات. فصلنامه پژوهشنامه اقتصادی (آماده چاپ).
    • بانوئی، علی اصغر؛ عرب مازار یزدی، علی؛ شرکت، افسانه؛ کیانی راد، آذین و صادقی، نگین. (1401). نارسایی­های جداول داده- ستانده متعارف در ایران و راهکار برون رفت در سنجش صادرات و واردات ارزش افزوده. اقتصاد و تجارت نوین. (2)17، 36-3.
    • بانوئی، علی اصغر و فهیمی، بهاره. (1400). بکارگیری متوسط فاصله انتشار در شناسایی زنجیره‌های تولید و نسبت آن با ارزش‌افزوده داخلی در صادرات ناخالص و تخصص‌گرایی عمودی، مطالعه موردی اقتصاد ایران. مجله تحقیقات اقتصادی. (1)56، 58-25.
    • بانک مرکزی ایران. (1399). جدول داده-ستانده سال 1395 اقتصاد ایران. اداره حساب­های اقتصادی.
    • نجارزاده، رضا؛ عاقلی، لطفعلی؛ درگاهی، حسن و بیابانی خامنه، کاظم. (1399). اندازه­گیری شاخص­های وضعیت اقتصاد ایران در زنجیره­های جهانی ارزش و مقایسه با کشورهای منتخب. فصلنامه پژوهش­ها و سیاست­های اقتصادی. (28)94، 129-101.
    • Arto, I., Dietzenbacher, E., & Rueda-Cantuche, J. M. (2019). Measuring bilateral trade in terms of value added. Publications Office of the European Union.
    • Baldwin, R., & Lopez‐Gonzalez, J. (2015). Supply‐chain trade: A portrait of global patterns and several testable hypotheses. The World Economy, 38(11), 1682-1721.
    • Baldwin, R., & Robert-Nicoud, F. (2014). Trade-in-goods and trade-in-tasks: An integrating framework. Journal of International Economics, 92(1), 51-62.
    • Banacloche, S., Cadarso, M. Á., & Monsalve, F. (2020). Implications of measuring value added in exports with a regional input-output table. A case of study in South America. Structural Change and Economic Dynamics, 52, 130-140.
    • Banouei, A. A., Sherkat, A., Bazzazan, F., Shah Hosseini, S., Kiani Rad, A., (2023). Full comparision statisticals errors of the second and third tables types of and their relationship to value-added in gross exports. Journal of Economic Research. (Article in Press) (in Persian).
    • Banouei, A. A., & Fahimi, B. (2021). Application of average propagation length in identifying production chains and its relation to value-added in gross exports and vertical specialization: Case study of Iran. Journal of Economic Research (Tahghighat- E- Eghtesadi), 56(1), 25-58. (in Persian).
    • Banouei, A. A., Arabmazar Yazdi, A., Sherkat, A., Kiani Rad, A., & Sadeghi, N. (2022). Fallacies of conventional import type input-output table in Iran and way out in measuring value-added in exports and imports. New Economy and Trade, 17(2), 3-36. (in Persian).
    • Chen, X., Cheng, L. K., Fung, K. C., Lau, L. J., Sung, Y. W., Zhu, K., ... & Duan, Y. (2012). Domestic value added and employment generated by Chinese exports: A quantitative estimation. China Economic Review, 23(4), 850-864.
    • Chenery, H. B., Robinson, S., Syrquin, M., & Feder, S. (1986). Industrialization and growth. New York: Oxford University Press.
    • Dietzenbacher, E., Albino, V., & Kuhtz, S. (2005, June). The fallacy of using US-type input-output tables. In International Conference in Input-output Technique (Vol. 15).
    • Grossman, G. M., & Rossi-Hansberg, E. (2008). Trading tasks: A simple theory of offshoring. American Economic Review, 98(5), 1978-1997.
    • Hummels, D., Ishii, J., & Yi, K. M. (2001). The nature and growth of vertical specialization in world trade. Journal of International Economics, 54(1), 75-96.
    • Johnson, R. C. (2014). Five facts about value-added exports and implications for macroeconomics and trade research. Journal of Economic Perspectives, 28(2), 119-42.
    • Johnson, R. C., & Noguera, G. (2012). Accounting for intermediates: Production sharing and trade in value added. Journal of International Economics, 86(2), 224-236.
    • Koopman, R., Wang, Z., & Wei, S. J. (2014). Tracing value-added and double counting in gross exports. American Economic Review, 104(2), 459-94.
    • Los, B. (2017). Input–output analysis of international trade. Handbook of input–output analysis, 277-328.
    • Los, B., Timmer, M. P., & De Vries, G. J. (2016). Tracing value-added and double counting in gross exports: comment. American Economic Review, 106(7), 1958-66.
    • Mahajan, S., Beutel, J., Guerrero, S., Inomata, S., Larsen, S., Moyer, B., … & Alfieri, A. (2018). Handbook on supply, use and input-output tables with extensions and applications.
    • Miller, R. E., & Blair, P. D. (2022). Input-output analysis: foundations and extensions. Cambridge university press.
    • Miller, R. E., & Lahr, M. L. (2001). A taxonomy of extractions. Contributions to Economic Analysis, 249, 407-441.
    • Miroudot, S., & Ye, M. (2021). Decomposing value added in gross exports. Economic Systems Research, 33(1), 67-87.
    • Mohajeri, P., & Banouei, A. A. (2021). Estimating domestic value-added in gross exports and its relation to vertical specialization: The case of Iran. Iranian Journal of Economic Studies, 10(1), 7-29.
    • Najarzadeh R., Dargahi, H., Agheli, L., & Biabany Khameneh, K. (2020). Measuring Iran's economy status indicators in global value chains and comparison with selected countries. Quarterly Journal of Economic Research and Policies, 28 (94),101-129 (in Persian).
    • Patunru, A. A., & Athukorala, P. C. (2021). Measuring trade in value added: how valid is the proportionality assumption?. Economic Systems Research, 35(2), 292-300.
    • World Bank. (2020). World development report 2020: Trading for development in the age of global value chains. The World Bank.
    • Zhong, S., & Su, B. (2021). Investigating ASEAN’s Participation in Global Value Chains: Production Fragmentation and Regional Integration. Asian Development Review, 38(02), 159-188.

Files

Share

How to cite

Statistics