Slicing Up Global Value Chains

Abstract

In this paper, we “slice up the global value chain” using a decomposition technique that has recently become feasible due to the development of the World Input-Output Database. We trace the value added by all labor and capital that is directly and indirectly needed for the production of final manufacturing goods. The production systems of these goods are highly prone to international fragmentation as many stages can be undertaken in any country with little variation in quality. We seek to establish a series of facts concerning the global fragmentation of production that can serve as a starting point for future analysis. We describe four major trends. First, international fragmentation, as measured by the foreign value-added content of production, has rapidly increased since the early 1990s. Second, in most global value chains there is a strong shift towards value being added by capital and high-skilled labor, and away from less-skilled labor. Third, within global value chains, advanced nations increasingly specialize in activities carried out by high-skilled workers. Fourth, emerging economies surprisingly specialize in capital-intensive activities.

Impacts Embodied in Global Trade Flows

“…One study found that the foreign VA content of exports from Luxembourg was 61 % in 2011 (Foster-McGregor and Stehrer 2013 ). Interestingly, there seems to be a trend towards value being added by capital and high-skilled labour and away from less-skilled labour (Timmer et al 2014 ). The capital share in the VA of emerging economies is rising, whilst the share of low-skilled labour in their VA is declining.…”

“…A strong driver of globalisation has been the move of production to places where wages and therefore total production costs are relatively low (Timmer et al 2014 ). A large workforce in developing low-wage countries is employed to manufacture goods for exports, mostly to the developed world.…”

“…On average, exports make up 30 % of a country's GDP (World Bank 2015 ). The value added along global production chains (outside the country of completion) has steadily increased since 1995, only briefl y interrupted in 2008 due to the global fi nancial crisis (Los et al 2015 ;Timmer et al 2014 ). This trend is seen as a clear sign that production has shifted from the regional to the global scale.…”

Slicing Up Global Value Chains: a Micro View

“…In reality, however, all but the most basic products are an assemblage of inputs sourced from around the world. Timmer et al (2014) provided a macro-view of the Bmade in the world^phenomenon and used the World Input-Output Tables (Dietzenbacher et al 2013) to document the rapid fragmentation of production and increasing value-added share being captured by the owners of capital and highly skilled labor since the early 1990s. In addition, these researchers also noted that the developed countries increasingly specialize in functions carried out by highly skilled workers and that the developing countries have increased their specialization in capitalintensive functions.…”

Carta Mensal INTAL: No 227: Julho, 2015

“…Pelo contrário, a montagem e a manufatura geram uma fração menor do VA. Em segundo lugar, mostrou que as cadeias de valor industriais são cada vez mais internacionalizadas e nelas perde peso o emprego menos qualificado. Por um lado, é evidente o aumento do VA estrangeiro nas cadeias de valor do mundo todo, como o caso da indústria automotiva alemã (TIMMER et al, 2013) ilustra. O deslocamento foi impulsionado inicialmente pelos custos salariais menores, e depois pela redução dos custos para coordenar atividades a distância, pelos avanços nas tecnologias de informação e comunicação, etc.…”