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Application of factor decomposition techniques to vertical specialisation measurements

By Bo Meng, Norihiko Yamano and Colin Webb

Abstract

The increasing importance of vertical specialisation (VS) trade has been a notable feature of rapid economic globalisation and regional integration. In an attempt to understand countries’ depth of participation in global production chains, many Input-Output based VS indicators have been developed. However, most of them focus on showing the overall magnitude of a country’s VS trade, rather than explaining the roles that specific sectors or products play in VS trade and what factors make the VS change over time. Changes in vertical specialisation indicators are, in fact, determined by mixed and complex factors such as import substitution ratios, types of exported goods and domestic production networks. In this paper, decomposition techniques are applied to VS measurement based on the OECD Input-Output database. The decomposition results not only help us understand the structure of VS at detailed sector and product levels, but also show us the contributions of trade dependency, industrial structures of foreign trade and domestic production system to a country’s vertical specialisation trade

Topics: Developing countries, Developed countries, International trade, Input-output tables, Vertical specialisation, Factor decomposition, Input-output, 678.01, C Developing countries 発展途上国, D Developed countries 先進国, G World,others, F14 - Country and Industry Studies of Trade
Publisher: 日本貿易振興機構アジア経済研究所
Year: 2011
OAI identifier: oai:ir:2344/942
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