Measuring Vertical Specialization: The Case of China

Abstract

The explosive growth of Chinese trade may be due to international production fragmentation, but few have assessed these phenomena together, in part, because it is difficult to measure the vertical specialization (VS) of China's trade. Unique features of China's processing trade cause both identification of imported inputs and their allocation across sectors to vary by trade regime. This paper estimates the VS of Chinese merchandise exports, addressing these two challenges. A new method to identify Chinese imported inputs is developed, and used to calculate VS by sector and destination. VS estimates based on the official Chinese input-output table are contrasted with those based on a split table, capturing processing and normal exports separately. Last, the paper tests whether Chinese "export sophistication" can be explained by VS.* Dean (corresponding author): Brandeis University,

Vertical Specialization of Production: Critical Review and Empirical Evidence for the Mexican Manufacturing Industries 1994-2014

“…Several authors have made adjustments to definitions of Hummels et al (1998) or Hummels et al (2001) to match their theoretical approaches (Daudin et al 2011;Dean et al, 2011;Jiang & Milberg, 2012;Koopman et al, 2012;Meng et al, 2010;Nordas, 2008;OECD, 2009;Ricotta, 2009;Yang et al, 2015). Other authors have offered working definitions.…”

“…An analysis of trade flows of goods in different stages of production requires at least one record of trade in intermediate goods (Grunwald & Flamm, 1985;OECD, 2009) Since fragmentation refers to the production and trade of goods at different stages of the production chain, the Input-Output (I-O) tables have been another source of data used to quantify this trade. Campa and Goldberg (1997), Hummels et al (1998) and Hummels et al (2001) quantitatively approached the phenomenon of fragmentation using I-O tables (Amador & Cabral, 2009;Breda et al, 2008;Dean et al, 2011;Koopman et al, 2014, Daudin et al 2011Jiang & Milberg, 2012;Koopman et al, 2014Koopman et al, , 2012Meng et al, 2010;Nordas, 2008;OECD, 2009;Ricotta, 2009;Yang et al, 2015). All three works have drawn attention to the growing share of intermediate goods in world trade and the need for quantification in order to assess potential impacts on the rest of the economy.…”

“…Some works refer to the analysis of individual countries (Bastos & Silva, 2010;Koopman et al, 2014Koopman et al, , 2012Nordas, 2008;Ricotta, 2009;Yang et al, 2015Dean et al, 2011, regions (Breda et al, 2008;Inomata, 2008), or to a select number of countries (Amador & Cabral, 2009;Koopman et al, 2012, Daudin et al 2011Jiang & Milberg, 2012;Meng et al, 2010;OECD, 2009;Ricotta, 2009;Yang et al, 2015). Other studies concentrate on the determinants of VS (Clark, 2010b;Lopez and Holmes 2011;Nordas, 2008) or on the supply-driven I-O model (Gosh's I-O framework) to measure the degree of VS (Meng et al, 2010).…”

“…3 Some researchers have used a combination of international trade statistics and I-O tables to study in more detail the trade of goods in different stages of production (Amador & Cabral, 2009;Breda et al, 2008;Dean et al, 2011;Lopez & Homes, 2011;Koopman et al, 2014Koopman et al, , 2012.…”

Japan and economic integration in East Asia: post-disaster scenario

“…Dean et al (2011) shows that although China's export composition has become so diversified that it includes highly sophisticated products similar to that of OECD countries, more high-tech products tend to depend on an Asian supplier network, while Chinese industries are more vertically specialized in labor-intensive stages of production. As Athukorala and Yamashita (2006) point out, it is worth noting that despite growing intra-regional trade in East Asia, the region's dependence on extra-regional markets in final goods demand has not been reduced but, on the contrary, has increased.…”