American Economic Association
Slicing Up Global Value Chains
Author(s): Marcel P. Timmer, Abdul Azeez Erumban, Bart Los, Robert Stehrer and Gaaitzen J.
de Vries
Source: The Journal of Economic Perspectives, Vol. 28, No. 2 (Spring 2014), pp. 99-118
Published by: American Economic Association
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of Economie
Journal
Number
28,
Perspectives—Volume
2—Spring
99-118
2014—Pages
Slicing Up Global Value Chains1
Marcel
P. Timmer, Abdul Azeez Erumban,
Stehrer, and Gaaitzen J. de Vries
Robert
an already classic study of the iPod, Dedrick,
discuss
In
led
and
how
the
that
parts
iPod
are
sourced
a US-based
by Apple,
is assembled
from
Samsung
turing
contrast,
no
South
high-value
than
components,
such
a
suggest
similar
labor,
high-skilled
low-skilled
activities
case
in time,
which
patterns.
How
■ Marcel
P.
Senior
are
Economist
hundred
This
and
mobile
while
in
from
and
and
deliver
laptops
and
capital
countries
vivid
In
to capture
telephones,
another
manufac
memory.
is estimated
emerging
is
one-third
from Japan and
display,
nations
contribute
Ali-Yrkkô,
example,
discuss the Nokia N95 smartphone.
for high-end
the extent
of international
Director
network
between
profits
workers
advanced
about
process
is Professor
drive,
of tablets,
conducted
questions
part
by Chinese
value:
as
(2010)
components
production
to capture
hard-disk
of the value,
little
mainly
is the
pervasive
world.
major
specialization;
add
obvious
Timmer
as the
studies
most
that
another
and Ylà-Anttila (2011)
studies
raises
Centre (GGDC),
of
capturing
Rouvinen, Seppâlâ,
Such
Other
pattern
the
several
is estimated
activities
testing
2 percent.
Kramer, and Linden
from
retail price. Asian firms like Toshiba
capture
and
around
which
Korea
assembling
more
from
company,
and one-half of an iPod's
in China
Bart Los,
electronics
to which
for one
they represent
production
of the Groningen
and
fragmentation
Growth
and
point
broader
for a
Development
Universityof Groningen, Groningen, Netherlands. Abdul Azeez Erumban is
at The
Conference
Board,
Brussels,
Belgium.
Bart
Los
is Associate
Professor
of Economics, University of Groningen, Groningen, Netherlands. Robert Stehrer is Staff
Economist
and
Deputy
Scientific
Director
at the Vienna
Institute
for International
Economic
Studies (wiiw), Vienna, Austria. Gaaitzen J. de Vries is Assistant Professor of Economics,
University
of Groningen,
Groningen,
rug.nl, [email protected],
' To access
the Appendix,
Netherlands.
Their
email
addresses
are
m.p.timmer@
[email protected], [email protected], and [email protected].
visit
http://dx.doi.Org/10.1257/jep.28.2.99
doi=10.1257/jep.28.2.99
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All use subject to JSTOR Terms and Conditions
100
Journal
of Economie
wider
set of products?
Perspectives
How
does
the factor
content
over time when fragmentation deepens?
between
using
we provide
the
many
term
become
recently
Database
and
borrow
(to
has
economies
emerging
and
a macroeconomic
countries
many
chain"
that
and
high-income
this paper,
et al.
(Timmer
that
from
We
2014).
1995)
to the
trace
value
chains?
these
"slice
added
by all labor
In
exercise,
the global
up
value
technique
of the World
development
the
in
a decomposition
using
change
patterns differ
of the iPod
analogy
We
products.
Krugman
due
chains
production
participate
longitudinal
manufacturing
feasible
of these
And how do specialization
Input-Output
and
that
capital
is directly and indirectly needed for the production of final manufacturing goods. The
production
many
can
stages
We
be
to
seek
of
our
can
data
increased
rapidly
(Feenstra
as a starting
since
the
the
for
four
when
global
future
analysis.
major
trends.
it made
value
After
a short
over
international
First,
of production,
its appearance
there
of
fragmentation
content
chains
as
fragmentation
in quality.
variation
value-added
foreign
global
little
concerning
point
1990s
early
in most
with
discuss
by the
Second,
1998).
we
to international
prone
country
of facts
methods,
as measured
fragmentation,
highly
in any
a series
serve
and
are
goods
undertaken
establish
that
production
view
of these
systems
on
has
a global
is a strong
shift
scale
towards
value being added by capital and high-skilled labor, and away from less-skilled labor.
This
a pervasive
suggests
of technological
process
is biased
that
change
towards
the
use of skilled labor and capital. Third, within global value chains, advanced nations
increasingly specialize in activities carried out by high-skilled workers. The direc
tion
of
this
by relative
not
been
follows
change
factor
the
endowments
established
before.
activities;
capital-intensive
intuitive
across
share
capital
and
Fragmentation
Data
Before
out
laying
of production
some
patterns
in
and
data.
Concepts
and
Definitions
We wish to study the production
is consumed,
production
consumption,
pace
to
in contrast
added
as well
as investment.
has
in
specialize
is rising,
the
while
is declining.
how
of Production:
the
Method
international
products
that
and
fragmentation
on terminology,
of final products.
fragmentation
to intermediate
process. Consumption
it occurs
surprisingly
value
driven
advantage
at which
is occurring, it is useful to offer some background
methods,
product
their
Factors
as
comparative
the
economies
emerging
share of low-skilled labor in their value added
International
of
but
countries,
Fourth,
the
notion
continue
A final
on
in the
is broadly defined to include private and public
A global
value
chain
of a final
product
is defined
as the value added of all activities that are directly and indirectly needed to produce
it. This global value chain is identified by the country-industry where the last stage
of production
value
chain
takes
place
of electronics
before
from
delivery
Chinese
to the
electrical
final
user:
equipment
for
example,
manufacturing,
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All use subject to JSTOR Terms and Conditions
the
global
or
of
Marcel
cars
P. Timmer, Abdul
from
to note
German
that
the
For
China.
that
that
the
governs
Apple
transport
fact
mean
necessarily
Azeez. Erumban,
equipment
a product
domestic
firms
are
governance
the
governing
chain
processes
can
101
does
country
value
although
value
J. de Vries
it is important
in a particular
of iPods,
in global
Gaaitzen
However,
manufacturing.
is "completed"
network
production
on
more
Bart Los, Robert Stehrer, and
chain:
for
are
they
example,
in
completed
a useful
production,
not
starting
point is Gereffi (1999).
The
involve
as "snakes"
a sequence
final
a
stage
number
of
or
final
stick
of production.
Most
the
despite
a
snake-like
multiple
for
are
processes
we
terms,
sent
from
assembly
connotation
of this
reach
they
from
together
a
new
mixtures
complex
A to B, and
until
coming
to all fragmented
refer
on
of
Snakes
2013).
country
so
parts
sometimes
forms,
many
B to C, and
location
single
production
used
commonly
"chains,"
to
from
involve
Spiders
destinations
are
goods
sent
goods
take
and Venables
(Baldwin
"spiders"
intermediate
intermediate
product.
with
and
in which
into
incorporated
the
of production
fragmentation
characterized
component
of the
production
two.
To
as
processes
term.
In this paper we will focus on the global value chains of final manufacturing
products,
which
activities
in the
utilities,
and
we
value
for
the
in
but
principle,
World
the
accounts
To
measure
across
is freely
available
value
noncovered
et al.
tables
for
of the
European
Korea,
more
represent
detailed
than
of
part
the
and
production
will be
across
linkages
about
for
23
explic
industries.
of global
percent
of final services is possible
in
so.
to do
enough
global
value
countries.
The
at http://www.wiod.org,
each
has
since
year
Union
Taiwan,
Turkey,
the
world
et al.
is
economy
United
countries,
for
this
world
all
13
other
major
Japan,
Mexico,
40
countries
These
for the remaining
a model
such
provided
of
which
including
and
States.
flow
It provides
Indonesia,
In addition,
the
constructed
1, 2007)
India,
the
GDP.
track
Database,
2013).
40
of January
and
of world
to
specifically
covering
China,
need
Input-Output
been
1995
(as
Canada,
85 percent
we
chains,
World
Dietzenbacher
2014;
Brazil,
Australia,
South
Russia,
in
and
(Timmer
countries
economies:
is not
added
industries
of analyses
input-output
data
sizeable
contain
only
as agriculture,
of
stage
are
not
such
Database
Input-Output
products
type
current
any
of input-output
chains
do
sectors
at
contributions
modeling
manufactures
these
in other
inputs
provide
indirect
These
through
added
that
also
in 1995. Similar analysis of global production
GDP
27
services
Of course,
but
sector,
manufacturing
business
itly accounted
The
to as "manufactures."
of manufactures.
process
The
refer
that
the
value-added
of final output is complete. It contains data for 35 industries
decomposition
the
overall
economy, including agriculture, mining, construction, utili
covering
ties,
14
trade
1
industries,
manufacturing
constructed
data,
Ail online
by combining
following
appendix
the
available
and
national
conventions
with this paper
17
industries.
services
input-output
of the
tables
System
at http://e-jep.org
with
of National
The
tables
bilateral
have
been
international
Accounts.1
offers more detail on the construction
of this data.
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102
of Economie
Journal
One
also
labor
and
basis
of
needs
detailed
capital
roughly
attainment
of Education
secondary
college
degree
the EU KLEMS
by extending
additional
countries,
Workers
data
include
their
income
value
added
the
minus
collected
and
It
income.
broadest sense, including
to
family
those with a
data
as
the
and
is constructed
principles.
for
imputation
and
remuneration
represents
For other
same
an
a residual
defined
for
as gross
in
capital
physical capital (such as machinery and buildings),
resources),
intangible
as patents
(such
capital
4)
qualifica
and Timmer 2009).
workers,
and
(3
professional
according
is derived
skilled"
this
the
Standard
(5 and 6) includes
(O'Mahony
income
Capital
labor
mineral
been
on
0, 1, and 2)
categories
"Medium
countries,
on
identified
International
certain
skilled"
advanced
database
has
the
schooling.
including
"High
most
self-employed
is made.
(including
For
above.
are
"Low skilled" (ISCED
above,
degree.
college
and
in
defined
information
provide
of workers
types
as
secondary
and
schooling
tions, but below
levels
than
that
accounts
Three
(ISCED).
to less
corresponds
means
value-added
in production.
used
educational
Classification
Perspectives
and
the
land
trademarks),
and financial capital.
Value
Chains
is to decompose
Global
the
Decomposing
Our
aim
value
of a final
into
product
the value
added
by all
labor and capital employed in its global value chain. We begin by modeling the world
as an
economy
amount
seminal
inputs
intermediate
involving
again
all
intermediates
one
to trace
are
the
to input-output
an
end
added
one
the
by all labor
can
of any
and
and
Blair
was
(2009)
final
stage
employed
a
this value added
The
global
each
final
the
origin
value
all
industry
country.
A
row
produced
added
that
an
until
allows
introduction
starting
As
point.2
into
and
on
so
model
For
s
needs
the
value
In this way,
all global
value
by workers and capital
shows
the
distribution
of
across all global value chains in which the industry participates.
chains
or service
good
of
particular
and
be
of production.
chains in the world, as illustrated by Figure 1.
The final column in Figure 1 provides the value added
in
to
is decomposed
of all value
system
output
one
and
a useful
provide
in any
output.
need
a mathematical
the
trace
Leontief
intermediates,
product
needed
accounting
to produce
of production.
stages
and
(1936)
of final
intermediates
provided
the
particular
that
capital
a consistent
provide
These
He
in all
of Leontief
amount
intuitive:
factors
for.
Miller
value
and
and
production
needed
inputs
tradition
a certain
inputs.
accounted
analysis,
result,
in the
to produce
straightforward
and
capital,
themselves,
needed
is rather
insight
labor,
model
input-output
of factor
value
are
represented
produced
added
needed
by the
in each
for
columns.
country.
the
The
production
There
cells
of
is one
in the
the
column
column
final
good.
for
show
The
2
A formal description
of the method can be found in the appendix
with the papers at the JEP website:
Our approach
is related to Johnson and Noguera
and Koopman,
(2012a)
http://ejep.org.
Wang, and
Wei (2014).
Rather than using Leontiefs
content of trade flows, we
insight to analyze the value-added
focus on the value-added
content of final demand.
This is more in the spirit of work by Dietzenbacher
and Romero
"transactions"
(2007) and Antràs, Chor, Fally, and Hillberry (2012), who compute the average
a dollar of a given product will go through before being sold for final use.
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number
of
Slicing Up Global Value Chains
103
Figure 1
An
Framework
Accounting
for
Global
Value
Chains
Final products
identified
of a global
value
and industry
by country
Country 1
Industry
1
Value
Value
Country M
Industry
N
Industry
1
added
Industry
N
Industry 1
added
Country 1
from country
Industry N
industries
in
participating
Industry 1
value
global
chain,
of completion
Country M
IndustryN
chains
Total final output
value
World GDP
Note: Cell values
represent the value added generated in the country-industry given in the row, within the
value chain corresponding
to the country-industry of completion
given by the column.
global
across
sum
all
As
foreign.
will
values
GDP
as
all
the
labor
the
up
that
these
both
must
the
be
gross
are
somewhere
and
columns
of the
domestic
in
the
to global
equal
value
output
industries
consumed
being
Thus
content
car
final
of
foreign
of production
German
chain,
but
also
the
rows
value
final
as well
world,
add
as
output
to world
up
added
by national
value-added
will
be
for
is an
used
later
79
as
and
indicator
value
66
of the
industry
is
added
that
the
were
international
added
deliver
and
On
employed
value
value
1995
percent.
intermediates
capital
decom
that
includes
Between
to
such
domestic
industries
industries.
from
labor
share
all
the
This
German
of
manufacturing
industries,
calculated.
increased
results
over
summing
other
dropped
share
income
generating
in
be
the
equipment
German
services
including
content
value-added
and
can
product
itself,
By
in
of
example
transport
cars.3
employed
the
value-added
foreign
world
of the
output
capital
industry
production
a real
provide
short,
and
imported,
The
the
Germany—in
domestic
the
makes
Note
expenditure
1, we
for
the
are
products
final
Table
added
row.
convention.
position
by
bottom
expenditure.
global
In
in
final
equal
accounting
in
in the
given
product,
industries
participating
along
the
2008,
flip
side,
increasingly
outside
Germany.
fragmentation
on.
3
In this example,
as well as in the remainder
of the paper, we will analyze the value of final products
This means
prices, which is the ex-factory gate price before delivery to the final consumer.
that retail trade margins and net taxes are not included.
Retail margins can be sizable, and the World
Database
Input-Output
provides data to analyze these margins as well, but this is outside the scope of the
at basic
present
paper
as retailing
is an activity that is still mainly domestic
by nature.
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All use subject to JSTOR Terms and Conditions
104
of Economie
Journal
Perspectives
Table 1
Slicing Up the Global Value Chain of German Cars
( percent offinal output value)
1995
2008
79%
66%
value added
German
High-skilled labor
labor
Medium-skilled
Low-skilled
17%
34%
25%
labor
Capital
value
Foreign
16%
added
7%
4%
21%
20%
21%
34%
High-skilled labor
Medium-skilled
labor
labor
Low-skilled
Authors'
Source:
(ISIC
The
To
see
and
was
The
while
chain
tures,
as we will
share
both
of German
of labor
for
4%
8%
15%
100%
100%
World
Input-Output
are
of the value
added
equipment
manufacturing
and
factor
of this
our
to 65
in
Germany.
many
paper.
data
starts
percent.
The
of activities
other
Throughout
in
from
The
choice
are
paper
Trend
studied
of
to
the
about
remains
fragmentation
as all
year
noted
1995,
and
and
production
the
based
of the
in
the
global
chains
of manufac
we
focus
will
on
marks
2008
trends
and
however.
on
we
the
the
end
on the
discuss
in this
foreign
is Expanding
it has
coordination,
process,
extent
sketchy
for
otherwise.
of Production
communication
split
Knowledge
fragmentation
cross-border
unless
Fragmentation
costs
profitable
location.
or ending
monotonie,
plummeting
increasingly
production
and
1: International
With
lowest-cost
gradual
of beginning
drop
share
of a period as the global financial crisis struck. The findings do not depend
particular
29
increased.
content
for
of its location,
increased
71
workers
as well.
changed
irrespective
Germany
and
cars
by capital
from
representative
because
labor,
added
dropped
outside
to final
of German
by all
value
less-skilled
remainder
to 2008
the
location
cars
on
chain
added
that
within
in the
see
1995
value
find
of shifting
value
global
exclusively
patterns
from
over
We
the
almost
value
period
sum
can
workers
high-skilled
of the
for capital.
percent,
labor
table
from
content
one
this,
similarly
to 35
in
factor
based
9%
2013 Release.
gives a breakdown
German
transport
rev. 3 industries 34 and 35).
Note: The
output
calculations
November
Database,
6%
6%
4%
Capital
Total final output
3%
with
each
empirical
investment
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All use subject to JSTOR Terms and Conditions
stage
at
its
of international
development
Some
become
flow
papers
data
have
of firms
P. Timmer, Abdul
Marcel
Azeez Erumban,
Bart Los, Robert Stehrer, and
Gaaitzen
J. de Vries
105
Figure 2
Value-Added
Foreign
in 560
Shares
Global
Value
1995
Chains,
and
2008
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0
1
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1
.6
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r
1
1
.8
1995
Source: Authors'
calculations
based on World Input-Output
November
2013 Release.
Database,
dot represents the share of foreign value added in output of a manufactures
global value
chain in 1995 and 2008. Shares are plotted for 560 global value chains, identified by 14 manufacturing
industries of completion
in 40 countries. Squares indicate global value chains of electrical equipment
Notes: Each
(ISIC rev. 3 industries
the 45-degree line.
and diamonds
30-33),
indicate
petroleum
refining
(ISIC
The
23).
dashed
line is
and their affiliates: for example, see Fukao, Ishido, and Ito (2003) and Ando and
Kimura (2005) for Japanese firms; Hanson, Mataloni, and Slaughter (2005) for
US
and
and
firms;
nomic
Marin
evidence
countries
Here
view).
fragmentation
In
and
by the
from
the
on
product
rose
plot
vertical
and
chains,
of
from
the
axis,
to 34
analysis
that
chains
of final
value-added
shares
together
foreign
Ishii,
in
with
in
40
so
we
value-added
The
Macroeco
(2001)
andjohnson
in
trade
for
an
symposium
direct
provides
for
over
evidence
of
products.
in
1995
line.
have
for
share
Yi
specialization
this
a 45-degree
countries
fragmentation.
multinationals.
and
vertical
of Johnson
of completion,
international
28
value
foreign
Austrian
increasing
complementary
industries
the
and
by Hummels,
found
contribution
industry
manufacturing
pervasiveness
share
the
who
on
focusing
country
14
provide
2, we
Figure
2008
the
German
presented
b),
(see
we
for
(2011)
been
(2012a,
Noguera
most
has
data
each
has
on
the
horizontal
Products
for
year.
increased,
(unweighted)
percent.
This content downloaded from 193.54.110.35 on Wed, 3 Sep 2014 09:53:07 AM
All use subject to JSTOR Terms and Conditions
are
560
final
For
85
products
of
percent
indicating
average
axis
identified
the
foreign
106
of Economie
Journal
The
are
extent
of fragmentation
because
in a cluster
most
do
countries
of diamond-shaped
electrical equipment,
are
fragmentation,
shares
varies
in the
by diamonds
represented
shares
Perspectives
are
sourced
local
over
have
access
not
in the
by square
above
foodstuffs
increased
They
have
products.
Petroleum
very
foreign
upper
and
average
have
low
But
for
33
these
products,
in
Los,
Contrary
found
no
serious
in
change
the
and
de
to
the
Vries
signs
(forthcoming)
anecdotes
a
of
that
of multinationals
reversal
major
nature
geographical
show
Union,
and
Asia.
But
global
with
the
advance
in
Whether
the
future
and
wages
remain
in the
trend
will
depend
and
clustered
towards
on
However,
yet.
that
the
are
the
nological
progress
cheaper.
It remains
to be
Value
economies
as
of
of linkages
1990s,
between
of strong
localized
fragmentation
low-skilled-labor
chains
will
mechanized
Added
the
different
from
be
will
For
example,
tasks may well
offshored
if tech
countries
out
Labor
High-Skilled
to
leading
re-shored
play
risk
costs,
capital-abundant
forces
in
developments
activities.
might
in
production
how
continue
Furthermore,
process.
truly
of intermedi
complementarities,
intensive
major
the European
coordination
various
they
a
to become
including
trading,
again
fragmentation
suppliers
of value
up
find
argue that certain high-value-added
in the
seen
do
started
major
determinants,
and
picked
(NAFTA),
have
fragmentation
host
because
currendy
2: More
a
(2013)
in space
chains
global
strength
makes
Trend
have
production,
they
In
value
global
of transportation
discontinuities
large
activities
2000s,
costs
productivity,
and Venables
possibly
are
in 2008 and 2009,
trend
re-shoring
of fragmentation.
of emerging
this
considerations,
Baldwin
contrast,
shares
foreign
the
mainly took place within regional blocks: North America
ates.
In
intermediates
time.
Timmer,
2010.
for
production
percent.
of the
The global financial crisis created a dip in fragmentation
but
chains
value-added
foreign
to 40
as most
shares,
even
reflected
2. Value
of international
products,
from
products
value-added
oil feedstock,
of Figure
part
these
increased
relatively
agriculture.
For
points.
high
to domestic
typically regarded as the paragon
manufactured
from
figure.
points
shown
indeed
across
greatly
in the
and
future.
Capital
The opening up of China, India, and other emerging economies provided an
enduring increase in the global supply of low-skilled labor. How has this affected
the factor income distribution in global value chains? This is driven by the relative
of various
prices
tion,
both
of labor
and
across
economies
emerging
might
be
Changes
Figure
and
capital,
countries.
We
as well
as possibilities
first provide
3. The
separately.
suitable
when
in factor
value
thinking
income
of final
After
that
about
shares
in
manufacturing
we
offer
these
global
for factor
evidence
at the global level, followed by specialization
changes
that
types
within
on
substitu
factor
content
trends in high-income
some
discussion
and
of a framework
trends.
value
goods
chains
have
is decomposed
been
into
in
plotted
value
added
by four factors: capital and low-, medium-, and high-skilled labor. (In our approach,
value
added
and
income
of
factors
are
equivalent,
so
these
terms
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All use subject to JSTOR Terms and Conditions
will
be
used
Slicing Up Global Value Chains
107
Figure 3
Factor
in Value
Shares
Added
of 560
Global
Value
Chains
of Manufactures,
1995 and 2008
A: Capital
share
B: High-skilled
1
labor share
-4
/
.3
oo *6
o
o
CM
4
00
o
O
CM
'42
.2
.1
.2
0-K
0
0
0
.4
.2
.6
.8
0
1
,
.2
.1
1995
C: Medium-skilled
1995
labor share
D: Low-skilled
.7 i
•7
labor share
•7
.6
.6
/
.5
.5
00 .4
o2
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.4
oo
o
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Mà
0
0
0
.1
.2
.3
.4
.5
.6
.7
0
.1
.3
.2
1995
Source: Authors'
Notes: Factor
industries
calculations
shares
1995
and
indicate
we
have
capital
each
560
increased.
in
some
It was
high,
the
United
such
particularly
States
8 percentage
particularly
points
November
.5
.6
.7
show
the
64
the
factor
increase
capital
was
share
in those
equipment
and
the
Points
has
increase
positive,
the
chains,
happening
in 92
of value
than
added
percentage
final
output
and
increased
for high-skilled
of the
by
a large
Germany,
shares
This content downloaded from 193.54.110.35 on Wed, 3 Sep 2014 09:53:07 AM
All use subject to JSTOR Terms and Conditions
before,
possible
with
20
the
China,
percent
line
As
40
point,
capital
shares
share
45-degree
with
where
with
in which
in income
share
chains
income
its share.
groups
by more
machinery
the
the
1 percentage
production
of completion,
The
increased
increased
and
axis
above
product
about
by 14 manufacturing
The dashed line is the
(y-axis).
horizontal
2008.
of the
percent
strong
or more.
on
in
share
2013 Release.
identified
and in 2008
(x-axis)
14 manufacturing
average
countries
pervasive
we
the
chains:
transport
as
in 1995
in which
In
The
chains
as
axis
chains
value
of completion.
has
factor
vertical
global
was
was
the
in total
variance:
points.
on
on World Input-Output
Database,
of 560 global value chains,
added
in 40 countries,
value
countries
based
For
interchangeably.)
.4
1995
in value
of completion
line.
45-degree
in
_
.4
,
.3
by
workers
chains.
The
108
of Economie
Journal
Perspectives
Table 2
Factor
Shares
Value
added
Total
(billion
in Global
Value
of All
Chains
US$)
Manufactures
1995
2008
minus 1995
$6,586
$8,684
$2,098
40.9%
47.4%
6.5%
13.8%
15.4%
28.7%
24.4%
-4.2%
16.6%
12.8%
-3.8%
2008
By:
(%)
capital
high-skilled labor (%)
medium-skilled
labor (%)
low-skilled labor (%)
1.5%
based on World Input-Output
November 2013 Release.
Database,
factors in total value added based on all global value
presents shares of production
chains of manufactures.
Shares add up to 100 percent. Value added is at basic prices (hence excluding
net taxes, trade, and transport margins on output). It is converted to US dollars with official exchange
Source: Authors'
Notes: The
calculations
table
rates and deflated
to 1995 prices with the US Consumer
Price Index.
shown
Figures
may not add
due
to rounding.
unweighted
than
the
for
A
capital.
share
about
was
average
notable
increased
4 percentage
outlier
is the
by 12 percentage
share
declined
in
The decline
and
of
transport
(6
shares,
only
have
a low-income
with
with
cases,
are
lower
flip
the
side,
variance
where
industry
equipment
an
of
average
and
income
shares
1 percentage
States
decline).
percent
of the
cases.
of more
than
declines
see
with
example,
later,
in high-income
ending
United
clearest
chains—for
As we will
the
The
in 91
occasional
for
point.
declines
countries,
as
trend
The
of
for
decline
average
10 percentage
France,
Italy,
in low-skilled
but
countries
is found
also
points,
and
shares
in many
Spain
are
chains
not
that
as country-of-completion.
economy
the
points
food
European
in chains
was considered
macroeconomic
effects?
In
the
analysis
above,
each
product
chain
irrespective of its size. But bigger chains play a larger role in the
than
economy
ment, and machinery
in bigger
the
much
in many value chains. The medium-skilled
Germany
declined
of completion.
found
global
percentage
points
in
as countries
8
which
5 percentage
in particular
with
equipment
to
completion
What
of the
percent
electrical
On
a
has been particularly severe in major chains, like those of machinery
low-skilled
was
56
US
points.
medium- and low-skilled labor dropped
with
points,
economies.
smaller
ones.
Chains
of products
like
food,
transport
equip
typically have larger final output, as well as chains ending
To
account
for
this,
we
take
final
of all
output
manufactures
together (by summing over 560 manufactures chains) and provide a similar decom
position of value added. In effect, the factor shares are now weighted by the final
output
of their
chain.
The
results
are
given
in Table
2. Global
expenditure
on
manu
factures increased
by almost one-third, from $6,586 billion in 1995 to $8,684 billion
in 2008 (in constant 1995 prices). We find that the shares of value added by capital
and high-skilled workers increased at this aggregate level. This confirms that the
patterns
found
above
are
not
driven
by developments
in small
chains
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All use subject to JSTOR Terms and Conditions
only,
but
are
Marcel
P. Timmer, Abdul
economically
The
significant.
6 percentage
as the
points
of high-skilled
share
Azeez. Erumban,
points. The
Bart Los, Robert Stehrer, and
of value
added
shift was
most
share
upward
workers
increased
but
not
as fast,
with
than
chains.
The
1.5
workers declined
109
by more
in bigger
pronounced
as well,
J. de Vries
increased
by capital
shares of low- and medium-skilled
4 percentage
Gaaitzen
percentage
both by about
points.
we
Thus,
find
in
a bifurcation
the
factor
content
increasing
capital and high-skilled labor income
shares
for
medium-
capital
and
and
high-skilled
for
particularly
labor
low-skilled
55
captured
of global
value
chains
with
on the one hand, and declining
labor
on
the
other.
of manufactures
percent
Together
value
in
1995,
increasing to 63 percent in 2008. This increase is especially marked at the end
of the 1990s and again from 2003 to 2006. The latter period coincides with a
step
up
in
the
Organization
He
global
that
argues
of
presence
China
after
the
for
opportunities
of
up
opening
quick
Countries
High-Income
to the location
What happened
patterns
specialization
the
of the
in
world
South
Japan,
members
to
another
11
4
added
percent
percent.
percentage
shares
World
Trade
(Hanson
generated
in all
in
The
2008.
Shares
in North
points
by 18 percentage
each.
The
of
America
In
points.
contrast,
China
other
share
chains
manufactures
share
led
to a decline
can
is responsible
we
end,
and
place
all
be
viewed
declined
for half
in the
a comparison
play
an
declined
have
of this
of
active
role
in total
74 percent
declined
Europe
regions
pre-2004
countries
from
Asia
East
15
countries
as
that
Australia,
group
the
other
countries
high-income
emerging
this
of high-income
high-income
and
in global value chains? And
States,
and
this
and
world
2012).
United
group
speaking,
of the
countries
trade
the
increased
this
argument,
To
regions?
in one
Roughly
his
the world, limiting the share of labor in
the
Taiwan,
Union
group.
high-income
56
the
markets
capital
In
of value added
between
vary
Korea,
European
in international
value
to
in High-Skilled Labor in
Trend 3: Enhanced Specialization
Canada,
accession
international
of capital.
relocation
in the bargaining power of labor around
value added vis-à-vis capital.
did
its
in 2001. This finding is consistent with the model of Rodrik (1997).
in 1995
from
21
to
by around
rapidly
increase,
increased
from
4
to 13 percent, accelerating in the period after it joined the World Trade Organiza
tion in 2001. Shares also rapidly increased in other emerging economies, including
Brazil, Russia, India, and Mexico.4
4
Given sizable
Table 1, available online with this article at http://ejep.org.
This is shown in Appendix
flows of foreign investment, part of the value added in emerging regions will accrue as income to multina
in advanced
tional firms headquartered
regions. However, analyzing capital income on a national rather
to
value-added
basis is notoriously difficult. To establish the full link from production
need data on the
and finally to personal
income distributions, one would additionally
ownership of firms (Lipsey 2010).
than a domestic
factor incomes
actual
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110
of Economie
Journal
Perspectives
Table 3
Shares
Factor
in Global
Value
Chains
of Manufactures,
Value added in value chains of manufactures
In high-income
(billion
by Region
2008
1995
2008
$4,863
$4,864
minus 1995
countries
US$)
$1
By:
(%)
capital
high-skilled labor (%)
labor (%)
medium-skilled
low-skilled labor (%)
In other countries
(billion
35.9%
38.7%
2.9%
16.8%
21.8%
5.0%
33.3%
30.3%
14.0%
9.1%
$1,723
$3,820
$2,097
55.2%
58.4%
3.2%
5.4%
7.1%
1.7%
15.6%
17.0%
23.8%
17.5%
$6,586
$8,684
—3.0%
-4.9%
US$)
By:
(%)
capital
high-skilled labor (%)
medium-skilled
labor (%)
low-skilled labor (%)
Worldwide
(billion
1.4%
-6.3%
$2,098
US$)
Source: Authors'
based on World Input-Output
calculations
November 2013 Release.
Database,
of production
factors in total value added in a region, based on all global value chains
of manufactures.
Value added by a region is sum of value added by labor and capital on the domestic
countries include Australia, Canada, and the United States; Japan, South Korea,
territory. High-income
and Taiwan; and all 15 countries
that joined
the European
Union before 2004. Value added
and
Notes: Shares
is at basic prices (hence excluding net taxes, trade, and transport margins on output). It is
expenditure
converted to US dollars with official exchange
rates and deflated to 1995 prices with the US Consumer
Price Index. Figures may not add due to rounding.
with
Concomitant
as well.
changed
focus
on
In
producing
a production
for
the
across
erosion
factors
that
one
countries,
of mature
while
tasks,
production
(Hanson
offshoring
in those
specialization
model
are
might
patterns
of trade,
countries
relatively
abundant.
the
that
expect
will
As
standard
predictions will still hold; the rise of China and other emerging
accelerates
labor-intensive
of production,
Heckscher-Ohlin
intensive
fragments
Heckscher-Ohlin
in location
change
traditional
goods
chain
economies
this
the
2012).
Thus,
economies'
comparative
simultaneously
advanced
new
offering
countries
will
focus
in
advantage
opportunities
more
on
activi
ties that require high-skilled labor and capital, and other countries will specialize
less-skilled activities.
To
test
of global
shows
to
39
these
value
that
in
percent,
predictions,
chain
the
production
high-income
while
the
income
shift is observed
workers
increased
share
we
provide
in
the
countries
of labor
more
two
information
regions
in
Table
share
of
capital
the
declined
points,
while
the
S.
the
share
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All use subject to JSTOR Terms and Conditions
content
upper
increased
The value added
combined
factor
The
correspondingly.
across labor categories.
by 5 percentage
on
But
in
panel
from
the
36
major
by high-skilled
of medium-
and
Slicing Up Global Value Chains
111
Table 4
in Factor
Changes
Shares
over
in Global
1995-2008
Value
Chains
of Manufactures,
by Country
(in percentage points)
Low-skilled
Medium-skilled
labor
labor
High-skilled
labor
Capital
United
States
3.9
-1.9
-5.9
4.0
Japan
4.5
-5.4
-2.1
3.1
Germany
France
6.8
-2.8
-7.4
0.2
-8.7
United
8.4
-3.4
-8.0
1.2
10.2
-1.1
-14.8
10.4
5.5
4.7
8.1
Kingdom
Italy
3.4
0.1
Spain
Canada
0.1
-12.9
1.8
-2.0
-4.6
4.8
Australia
6.0
-8.4
-0.9
3.3
South
9.3
-11.6
-5.6
8.0
Netherlands
5.5
-7.3
-7.1
8.9
Total all high-income
2.9
-4.9
-3.0
5.0
China
9.3
-9.3
-2.1
2.0
1.1
-1.6
-2.4
Korea
Russian
Federation
Brazil
-6.7
-4.8
2.8
7.5
India
4.5
-5.9
-1.7
Mexico
6.4
-4.2
-0.5
4.5
4.0
3.1
-1.7
5.2
3.1
5.3
-8.1
1.3
1.6
World minus all high-income
3.2
-6.3
1.4
1.7
World
6.5
-3.8
-12.7
Turkey
Indonesia
1.5
-4.2
Source: Authors'
calculations
based on World Input-Output
November 2013 Release.
Database,
3. In this table, the percentage
point changes in factor shares are given for each country.
in four factors for each country add up to zero by definition, but here they may not due to
Changes
rounding. Countries are ranked by GDP.
Notes: See Table
low-skilled
is in
workers
line
with
differs
across
vidual
countries.
income
with
shares
the
largest
by 8 percentage
declined
the
Heckscher-Ohlin
In
countries.
in most
increases
but
4,
we
provide
the
found
countries,
except
in Germany
and
change
of the
magnitude
changes
for
decompositions
of countries,
group
in the
South
of this
direction
similar
first at the high-income
Looking
increased
Table
The
points.
intuition,
United
Korea
and
Kingdom
and
(7
indi
capital
Italy,
9 percentage
points). The value-added share by high-skilled workers increased in all countries
in this group, ranging from around 3 percentage points in Australia, Germany,
and
Japan
and
4 in
the
United
States
to more
South Korea, and the United Kingdom.
around
in the
medium-skilled
high-income
labor
shares
In
countries.
declined
Income
Canada,
faster
tries like France, the United Kingdom,
than
than
8 in
the
France,
Netherlands,
shares of other labor declined
Germany,
low-skilled
and
the
shares.
United
In
other
all
States,
coun
Italy, and Spain, as well as in South Korea
This content downloaded from 193.54.110.35 on Wed, 3 Sep 2014 09:53:07 AM
All use subject to JSTOR Terms and Conditions
112
Journal
and
of Economie
Perspectives
low-skilled
workers'
Australia,
than
10 percentage
for
initiatives
holds.
fragmented
is no
involves
only
that
turing
are
factures
production.
the
and
to
effect
was
tasks
wrong
way
in
the
outside
jobs
of all jobs
Kingdom
would
the
than
Los,
(Timmer,
positive
policies
do
well
to manu
lead
lower
of Table
3.
The
in this
share
and
into
de
might
region.
This
of low-skilled
the
the
not
workers
such
Trade,
vertical
Evenett
2012).
Economies
Based
on
value-added
the
share
as shown
happen,
that
labor,
increased
and
declined
the
and
Germany
of the world?
rest
expect
with
jobs
in Emerging
did
of services
2013).
(Baldwin
in the
one
Vries
account
countries
patterns
In
to
outside
period,
States.
in manufacturing
in Capital
predictions,
to increase
take
across
to specialization
workers
United
decline
to
and
within
during
the
Stehrer,
Specialization
happened
less-skilled
and
number
this
and
goods
therefore
the
countries,
increased
chain,
manufac
related
might
but
manufactures
of intermediate
chains
with
firms
of final
also
half
all high-income
faster
Heckscher-Ohlin
part
other
delivery
value
production
even
4: Enhanced
standard
up
global
of
but
strong
that
Competitiveness
manufacturing
production
almost
the
of
sector
prompted
to note
policies.
the
the
made
in
United
of production
What
integration
have
industrial
becoming
public
clusters
through
latter
in almost
of the
was
industrial
Trend
related
manufacturing
increase
integration
domestic
illustrate,
Specialization
exceptions
net
to frame
successful
To
are
"manufacturing"
manufacturing
the
Indeed,
related
this
by more
in traditional manufacturing but might also generate newjobs
manufacturing.
Italy,
the
the
in 2008
fact,
decliningjobs
notable
in
indirectly
In
by
of former
it is important
proposals,
and
ones.
foreign
jobs
services.
jobs
on
also
and
not
like
determined
solely
domestic
of such
and
decline,"
in a number
performance
increasingly
both
merits
sectors
economic
longer
relies
the
production,
to evaluate
of "manufacturing
in terms
"re-industrialization"
aside
Setting
sometimes
most,
and jobs for less-skilled workers have stirred major policy
framed
mostíy
various
suffered
points.
incomes
Declining
concerns,
shares
income
of
in the
6 percentage
by
points from 24 percent in 1995 to 18 percent in 2008. The share of medium-skilled
workers
increased,
number
of workers
but
only
one
percentage
in global
value
by
employed
This
point.
chains
is not
to
in manufacturing
say
that
the
On
declined.
the contrary: 42 million jobs in China were added, 20 million in India, 6 million in
Brazil, and 2 million in Mexico. (These figures are spelled out in Appendix Table 2,
available online with this article at http://ejep.org.)
But in these countries as a
whole,
remained
wages
relatively
low,
and
global
benefited capital. In 1995, the value-added
was
already
This
actually
capital
other
high
is perhaps
increased
share
major
at 55
not
in
percent,
surprising
even
China
emerging
these
further
by 3 percentage
increased
by almost
economies
like
India,
chain
production
mainly
share of capital in emerging economies
to 36
compared
because
value
in the
percent
countries
points
10
are
in the
percentage
Indonesia,
high-income
abundant
period
points.
and
Mexico
This content downloaded from 193.54.110.35 on Wed, 3 Sep 2014 09:53:07 AM
All use subject to JSTOR Terms and Conditions
region.
in labor,
up
but
to 2008.
Capital
also
it
The
shares
increased,
in
P. Timmer, Abdul
Marcel
by around
variant
5 percentage
of the
Bart Los, Robert Stehrer, and
Arzeei Erumban,
as shown
points,
classical
in Table
labor
of surplus
story
4. These
fita
developments
Lewis
by
J. de Vries
Gaaitzen
With
(1954).
113
modern
capital
being
globally mobile, it will relocate to locations with high rental-wage ratios. As long as
is a reservoir
there
of unskilled
marginal
productivity,
rental-wage
of capital
will
in early
Table
in
all
Hanson
1996).
across
by the
produced
remain
their
States
divided
income
of offshoring
two
share
increased
took
in
place
in the
States
of so-called
into
their
decline.
that
United
1980s
and
(Feenstra
by
"maquiladoras"
that
Suppose
below
workers
changes
the
model
border.
be
can
the
with
establishment
US-Mexican
than
of high-skilled
echoes
seminal
the
Thus,
high.
rather
share
well
at wages
employed
chains
to the
this
United
will
This
In
the
be
value-added
production
related
they
located
can
of development,
economies.
into
1997),
firms
ratios
stages
the
it entered
and
Hanson
that
emerging
when
(Feenstra
US
shows
4 also
almost
Mexico
increase
that
labor
the
One
tasks.
originally
good
task
is relatively
low-skilled intensive, like assembly of components, and the other task is high-skilled
intensive, like producing high-tech components. As the relatively low-skilled task is
offshored to Mexico, production in the United States will become more high skilled,
further specializing in its abundant factor. Average skill intensity in Mexico increased
after
in the
fragmentation
1980s.
this
However,
one
is only
which
outcome,
possible
will depend on the skill intensity of the offshored task compared to the existing skill
intensity of production in the country (Arndt and Kierzkovski 2001; Feenstra 2010).
It could
also
rather
fact,
than
the
that
go
up,
as
final
theoretically
we
sketch
Substitution,
Production
national
labor
high-skilled
in
the
and
capital.
our
and
change
This
but
in
the
factor
was
pattern
in
also
see
not
decrease
Table
the
In
4.
complex
the production
process.
a framework.
Change
increasingly
fragmented
across
was
biased
towards
content
only
clearly
for
found
particular,
workers
of high-skilled
carried
activities
In
economies.
emerging
share
value-added
Mexico;
understand
Technological
have
in their
actually
about
of such
elements
in
to fully
thinking
manufacturing
countries,
increase
widespread
in
and
high-income
main
the
trends
and
possible
Complements,
processes
borders,
recent
refine
to further
would
of production
intensity
by more
illustrated
are
section,
skill
average
we need
at work
Tasks,
out
the
outcomes
many
patterns
In
be
the
remark
was
able. In Figure 4, we plot for each of the 40 countries in the World Input-Output
Database the share of value added by high-skilled workers for 1995 on the horizontal
axis
and
for
on
2008
the
vertical
All
axis.
observations,
two
except
(Mexico
and
are above the dotted 45-degree line, indicating a global shift towards use of
countries.
relatively more high-skilled workers in global value chains in all of these
Estonia),
What
shares
are
might
economies
change
by the
determined
and
of substitution,
led
to
the
In
for this pattern?
account
interplay
a shock
in
of relative
of technical
nature
the
will lead to an increase
global
models
traditional
prices
change.
supply
For
their
of factors,
opening
example,
of unskilled
factor
of production,
workers.
in its factor share will depend
elasticities
up
Whether
Asian
this
on the elasticity of
This content downloaded from 193.54.110.35 on Wed, 3 Sep 2014 09:53:07 AM
All use subject to JSTOR Terms and Conditions
114
of Economie
Journal
Figure 4
Shares of High-Skilled
Manufactures,
Perspectives
Labor in Value Added of All Global Value Chains of
by Country
.35
/
y
♦kor
.30
y
/
FRA
♦fra
♦
♦gbr
♦GBR
.25 -
USA*DEV
♦ESP
%NLD
.20
00
o
o
CV
'
♦fin
♦FIN
.15 -
♦V
y
.05 -
y
'
x
♦est
, -V
/'
y'
^♦^Índ
.10
y
/
^#
♦
♦♦j™
♦irl*
♦ ♦
■x
yf
y
y
/
/
♦♦ ' ^ ✓'
♦'"Ímex
♦mex
0- y
♦CHN
♦CHK
y
y
-ii
0
11
.05
1
.1
i1
.15
1
.2
1
r
.25
1—
1
.3
r~
.35
1995
Source: Authors'
calculations
based on World Input-Output
November 2013 Release.
Database,
of high-skilled workers in a
country's value added, based on all global value chains of
in 1995 (x-axis) and in 2008
manufactures,
line. Indicated
(y-axis). The dashed line is the 45-degree
are China (CHN),
India (IND),
Mexico
Ireland (IRL), Japan (JPN), the Netherlands
(MEX),
(NLD),
Spain (ESP), the United Kingdom
(GBR), Finland (FIN), France (FRA), Germany (DEU),
South Korea
(KOR), Estonia (EST), and the United States (USA).
Notes: Shares
substitution
between
don possibilides
workers
and
unskilled
in Asia
workers
and
but
elsewhere,
also
on
the substitu
between unskilled and skilled workers, as well as between unskilled
capital.
Another
element
important
mation and communication
is the
advance
rapid
in
the
infor
technology industry, driving down the relative price of
information technology capital (
Jorgenson 2001). Again, the effects on the share
of capital income will crucially
depend on the substitution possibilities between infor
mation
technology
capital
Substitution
of growth
and
conceived
5
The
are
rather
of as a mapping
most often-used
of substitution
(CES)
the
possibilities
international
of substitution
on
one
hand,
and
various
are hard to model
trade
restricted.5
rely
on
In
production
these
types
of labor
and measure.
models,
the
other.
Archetype models
functions
the
on
where
production
elasticities
process
is
from factor inputs to output, as if
taking place in one
functions are the so-called
production
Cobb-Douglas
functions. In the Cobb-Douglas
function, elasticities
and the constant elasticity
are always one. Hence factor
This content downloaded from 193.54.110.35 on Wed, 3 Sep 2014 09:53:07 AM
All use subject to JSTOR Terms and Conditions
115
Slicing Up Global Value Chains
With
stage.
tion
as
and
capital
possibilities
than
into
tasks,
a richer
between
various
is found
in
useful
are
rather
map
for
more
which
to
completed
a direct
mapping
which
of
the
genera
by various
from
subsequently
of
modeling
factors
model
to be
labor
into
map
and
complementarities
both
production,
domestic
foreign.
An
around
Autor
differences
in
can
tasks
to
of certain
tasks.
better
handling
in
According
Murnane
manual
tasks
latter
and
with
The
our
in
important
that
observation
are
skilled
effect
Autor,
on
income
shares
declining
workers
performing
as in many
value
global
and
Levy,
workers
such
for
much
labor.
educated
less-skilled
manufacturing
be
highly educated
moderately
interactions,
supplying
white-collar
by
an
as
capital
the
might
capital complements
for
mapping
for
capital
forward
put
personal
require
for
the
both
services.
which
chains,
low-
and
medium
and
Stehrer,
(Foster-McGregor,
and
the
build-up
the
of intangibles
latter.
and
In
requires
an
extended
Slaughter
(2012)
that
this
will
the
demand
increase
more
that
extent
Lawrence,
Haskel,
are
workers
towards
research
firm-specific
To
framework,
skilled
directed
databases,
2012).
labor,
high-skilled
Heckscher-Ohlin
high-skilled
organizational
Iommi
and
assume
and
potential
and
capital
is increasingly
and
names,
Jona-Lasinio,
of
software
(including
brand
another
provides
shares
countries
capital
design),
Haskel,
(Corrado,
for
in advanced
as intellectual
such
capital
intangible
value-added
increasing
investment
Recent
of
importance
development,
Learner,
little
than
tasks
Substi
comparative
for
allows
out
carrying
the
labor
technology
substitutes
has
and
tasks:
task).
endogenous
also
competing
at
in this
supplies
with
revolves
out
carrying
better
is an
framework
technology
manufactures
increasing
intangibles
capital
labor
discussed
that
2013).
explanation
workers.
less
in
workers
deVries
and
are
that
in
advantage
information
tasks,
demand
framework
factors
there
hypothesis"
and
tasks,
tasks
tasks
is consistent
skilled
abstract
routine
performing
The
in
The
labor
relatively
that
administrative
information
engaged
are
on
source
"routinization
(2003),
workers
some
such
types.
new
example,
of
a comparative
solely
another
routine
the
to
but
tasks,
of
a general
advantages
to have
skill
it as
For
They
depending
various
models
outline
is possible,
tasks
by modeling
input,
all
said
tasks
of the
advantages
recent
comparative
are
across
workers
(2011).
out
carry
(hence
of skills
from
this
and
workers
certain
tution
of
example
in Acemoglu
all
So
factors
allows
be
of "tasks"
factors.
framework
substitution
and
of a set
to output,
inputs
This
output.
a result
of production
combinations
it can
however,
fragmentation,
of output
in
productive
tasks involving working with intangible capital and show how this might explain the
evolution
or
of relative
trademarks
large
are
fixed-cost
possibilities
for
wages
different
component.
mark-ups.
in the
from
This
When
United
States.
traditional
Moreover,
capital
rise
often
gives
firms
operating
as
to imperfect
in
such
like
intangibles
assets
an
they
patents
have
typically
product
environment
markets
a
and
enlarge
cannot change over time. In the CES function, elasticities are also constant over time, but
might vary from one. However, in cases of more than two factor inputs, they are difficult to define.
cost shares
This content downloaded from 193.54.110.35 on Wed, 3 Sep 2014 09:53:07 AM
All use subject to JSTOR Terms and Conditions
116
of Economie
Journal
their
scale
of operations,
of growth,
model
in intangibles
the
in
market
new
invention
more
trade
the
as it expands
to the
relative
might
for
incentives
will
be
their
the
used,
In a dynamic
to labor.
reinforce
International
creation:
higher
case
is underway.
fragmentation
studies
unskilled-labor-intensive
like
the
iPod
have
a
The
equivalent.
and
of
of comparative
further
for
lenge
workers.
tive
as
This
the
generally,
of income
an
traditional
chal
interesting
in
manufacturing
demand
a global
for unskilled
value
chain
between
distinguish
the
comparative
and
advantage
improving,
believe
that
but
the
production
trade-offs
inputs. For example,
find
different
chain.
perspec
and
offshoring
the
consequences
from
standard
hence
to
for
all
be
of tasks
countries
trade.
better
to be
to
they
themselves
into
of opening
models,
find
up
understood
by
in the
the
less-advanced
decreasing
wage
on
to
average
We
capital.
conceptualizing
of factor
production
wage
process.
inequality
of the
position
may
workers
all workers
country
inequality
(for
a model in which
develop
stages
on
of
by combinations
of the
distri
according
it is on
such,
owners
to trade
depending
that
essence,
and
performed
various
the
international
specialize
As
workers
on
debated
extensively
). In
2011
from
gain
can
of production,
stages
of
investments
been
McMillan
necessarily
involved
sort
In particular,
to upstream
and
have
Costinot, Vogel, and Wang (2012)
workers
that
cross-border
countries
opportunities
as a set
process
heterogeneous
not
and
of trade
within
McLaren,
expands
welfare
the
in the
from
cannot
be
is a shift
decline
investigated
industries
and
Harrison,
fragmentation
very
only
impact
across
see
overview,
They
be
in both
value-added
declining
will
explanation
to a worldwide
But this shift of
increased
contradicting
facts
where
change.
More
the
possible
led
on
focusing
technological
an
can
question
analyses
bution
have
could
these
while
home
at
added
found
economies,
Squaring
One
we
Further,
emerging
advantage.
research.
that
technologies
in
workers
in value
their
countries,
concentrated
shares
capital
economies.
emerging
low-skilled
relocate
capital they need are available.
non-neutral:
decidedly
high-income
notions
for
of special
patterns
macroeconomic
lower-wage
functions
high-value-added
the skilled workers and intangible
was
to
activities
production
and
strategic
shares
larger
potential
Our findings fit a broad story in which firms in mature economies
activities
the
the
of
investor.
production
in
found
keeping
levels
higher
Remarks
Concluding
ization
to gain
and
openness
the
which
accruing
is likely
capital
increased
investment
profits
Perspectives
at the
be
in
move
bottom
of the
skill distribution but at the same time increasing it at the top.
outcomes
Many
ical
issue
is a first
are
as to which
step
in
this
theoretically
patterns
prevail.
investigation.
possible,
The
Future
and
development
statistical
it becomes
of world
an
ultimately
empir
tables
input-output
frameworks,
based
on
further
integration of micro- and macro-statistics will allow for increasingly richer explana
tions
of the
drivers
and
consequences
of international
production
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fragmentation.
Marcel
P. Timmer, Abdul
m We thank
Susan
Richard
Azeez. Erumban,
Lucian
Baldwin,
Robert Johnson,
Houseman,
Bart Los, Robert Stehrer, and
Cernât,
Carol
Corrado,
J. de Vries
Robert
HubertEscaith,
Bob Koopman,
DaleJorgenson,
Gaaitzen
Bart
Van Ark,
117
Feenstra,
Zhi
Wang,
Adrian Wood, and the editors of this journal for helpful comments and suggestions. Reitze
Gouma
provided
superb
by the European
Commission,
assistance.
Research
8: Socio-Economic
Theme
Program,
research
Financial
Sciences
and
for this research
support
Directorate
General
as
part
Grant
Humanities,
of the
was
provided
7th Framework
Agreement
no: 225
281.
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