Template-type: ReDif-Paper 1.0
Author-Name: Nomaler Ö. 
Author-Name: Verspagen B. 
Author-workplace-name: UNU-MERIT
Title: Analysing global value chains using input-output economics: Proceed with care
Abstract: Input-output economics has become a popular tool to analyse the  international fragmentation of value chains, especially now that several  multi-regional tables that cover large parts of the global economy have  become available. It has been argued that these tables, when analysed  with the help of the input-output economics toolbox, can provide better  insights about global value chains than can be obtained by case studies  of individual value chains. We argue that there are several problems  related to the aggregated nature of the input-output table that may lead  to large distortions and biases in the aggregate picture about global  value chains that is obtained by input-output analysis. There are three  main sources behind the distortion obtained in static decompositions of  value chains the average nature of value added to output ratios in the  tables, the emergence of production cycles in the process of aggregating  several value chains into a single table, and the characteristic of the  so-called inverse Leontief matrix to even out the value added  distribution. We provide an overview of how these distortions work, and  argue that under a wide range of circumstances, input-output methods  tend to overstate the contribution of the final sector to the value  chain. We also show that this bias does not vanish when we compare  input-output decompositions at two different points in time.
Keywords: Input-Output Models; Globalization: Macroeconomic Impacts; 
Classification-JEL: C67; F62; .
Series:  Working Papers
Creation-Date: 2014
Number: 070
File-URL: http://pub.maastrichtuniversity.nl/0836a649-d35c-46a5-a2c8-19d275a1fa8a
File-Format: application/pdf
File-Size: 399832
Handle: RePEc:unm:unumer:2014070