International Value-Added Linkages in Development Accounting

Alejandro Cunat; Robert Zymek

International Value-Added Linkages in Development Accounting

Alejandro Cunat, Robert Zymek

School of Economics

Research output: Working paper › Discussion paper

Abstract

We generalise the traditional development-accounting framework to an open-
economy setting. In addition to factor endowments and productivity, relative factor costs emerge as a source of real-income variation across countries. These are determined by bilateral trade frictions (which underpin the patterns of “international value-added linkages”) and the global distribution of factor endowments and final expenditures. We use information on endowments, trade balances and value-added trade to back out the relative factor costs of 40 major economies in a theory-consistent manner. This reduces the variation in “residual” TFP required to explain the observed per-capita income differences by more than one half.

Original language	English
Publisher	Edinburgh School of Economics Discussion Paper Series
Number of pages	48
Publication status	Published - Jul 2017

Publication series

Name	ESE Discussion Papers
No.	281

Access to Document

https://www.ed.ac.uk/files/atoms/files/281_-_international_value-added_linkages_2017.pdf

Cite this

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AB - We generalise the traditional development-accounting framework to an open-economy setting. In addition to factor endowments and productivity, relative factor costs emerge as a source of real-income variation across countries. These are determined by bilateral trade frictions (which underpin the patterns of “international value-added linkages”) and the global distribution of factor endowments and final expenditures. We use information on endowments, trade balances and value-added trade to back out the relative factor costs of 40 major economies in a theory-consistent manner. This reduces the variation in “residual” TFP required to explain the observed per-capita income differences by more than one half.

UR - https://ideas.repec.org/p/edn/esedps/281.html

M3 - Discussion paper

T3 - ESE Discussion Papers

BT - International Value-Added Linkages in Development Accounting

PB - Edinburgh School of Economics Discussion Paper Series

ER -

International Value-Added Linkages in Development Accounting

Abstract

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