Slicing Up Global Value Chains

Marcel Timmer, University of Groningen

Fostered by rapidly falling communication and coordination costs, possibilities for fragmentation of production are increasing. This offers countries the potential to specialise further and benefit more from their comparative advantages. Well-known recent case studies of mobile phones, iPads and laptops suggest a strong international division of tasks. Advanced nations specialize in high value–added activities such as software production, design, branding, logistics, finance and system integration which require high-skilled labour and intangible capital building. On the other hand, China and other emerging countries are mainly involved in the assembling, testing and packaging activities that require mostly unskilled workers (Dedrick et al., 2010; Ali-Yrkkö et al., 2011). So far, this pattern of increased specialization has not been confirmed for a wider set of products and industries.

In this paper we will provide a macro-perspective that complements the micro-studies. We will measure the value that is added in the various stages of production of a good, building upon a decomposition technique introduced by Leontief (1941) and more recently used in e.g. Johnson and Noguera (2012). We decompose the value of final manufacturing goods into incomes for capital and labour in any country that is directly and indirectly involved in the production of these goods. This includes both manufacturing and non-manufacturing activities.

Based on recently released World Input-Output Database (WIOD), we find that since 1995 in global production of manufacturing goods:
- International production fragmentation has increased for most products
- An increasing share of the value is added in natural resource and services industries.
- Increasing income share for capital in both advanced and emerging regions
- Increased specialization in high-skilled activities in advanced nations

About the speaker
Marcel Timmer is professor of Economic Growth and Development at the University of Groningen and director of the Groningen Growth and Development Centre (GGDC). He participates in various international programs funded by the National Science Foundation (NSF), the Economic and Social Research Council (ESRC) and the European Commission in the areas of international comparisons of productivity, technological and structural change and economic growth. He has been associate managing editor of the Review of Income and Wealth and extensively published in national and international journals, including the Review of Economics and Statistics, Economic Journal, Journal of Economic Perspectives, Journal of Development Economics, Economic Policy and the Journal of Economic History.

Venue: Conference Room

Date: 11 April 2013

Time: 12:30 - 14:00  CET