Browsing by Subject "Input-output analysis"

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Competitiveness at the country-sector level : new measures based on global value chains
(2018) Beißinger, Thomas; Marczak, Martyna
We propose the so-called domestic “embodied unit labor costs” (EULC) at the country-sector level as a new cost-related basis for measures of international competitiveness. EULC take into account that a sector’s labor costs constitute only a small share of its total cost which to a large extent consist of expenses for inter- mediate goods from other sectors. In line with a simple Leontief-type model, the proposed measure is constructed as a weighted average of unit labor costs of all do- mestic sectors contributing to the final goods of a specific sector. The contribution is expressed in value-added terms and takes global supply chains into account. We also show how EULC can be consistently calculated for sectoral aggregates such as the tradable goods sector. Based on EULC we propose the “embodied real effec- tive exchange rate” (EREER) at the country-sector level as a new competitiveness indicator where the relevance of trading partners is quantified by an appropriate value-added measure. The chosen value-added concept replaces gross exports tra- ditionally used as the weight basis in effective exchange rates. Using the World Input-Output Database (WIOD) we employ the proposed indicators to shed new light on changes in cost competitiveness at the sectoral level for Germany, and compare the empirical evidence with selected other euro area countries.
Degree of Openness and the Choice of Exchange Rate Regimes: A Re-Evaluation with Value-Added Based Openness Measures
(2005) Wang, Lars; Belke, Ansgar
The concept of trade openness is broadly applied as a potential predictor in numerous empirical studies, despite the fact that no commonly accepted approach of measuring openness has been developed. The most widely applied (?traditional?) openness indices are not able to accurately calculate the degree of trade openness. Many openness concepts try to adjust the traditional measures of openness with aim to increase the quality of assessment, but most of these attempts show a poor correlation with the traditional concept. This might indicate that the alternative approaches capture different aspects of trade openness. This study presents the development of innovative value-added based (?actual?) measures of openness towards international and bilateral trade, respectively. They are based on a multi-regional input-output analysis of income effects due to trade. In clear contrast to the mainstream view, the actual openness concept corrects the traditional concept by expressing trade in value-added terms instead of gross terms. Traditional openness measures do not take the international redistribution of income generated by trade into account. This means, for example, that the export ratio overstates the potency of a country to build a surplus in output at home because imported intermediate commodities that are employed in the process of production of exported commodities generate income abroad. The import ratio which expresses imports as a share of the gross domestic product overstates the dependency on imports since residents have to spend a lower portion of their income to purchase imports from abroad. Imports are partly produced with intermediate commodities delivered by the country that creates income for its production factors. The innovative actual openness concept is able to reflect the different structures of production among countries since the value-added created by trade is forecasted based on a sound theory of production. This makes it possible to quantify the effects of the interactions between industries within an economy. Open economies consist of more firms that import intermediate of final commodities for the purpose of their re-export than closed economies. These firms, which redistribute final commodities or process the finishing of imported intermediate commodities, employ less domestic factors of production and thus contribute less to national income than other firms which produce exports primarily with national intermediate commodities in all processing stages. This means that the more open economies are, the smaller the proportion of domestic production factors in the production process of exports is and the additional income earned from the selling of exports is again transferred abroad by means of imported intermediate commodities employed in exports. There are only a limited number of degrees of trade openness data bases based on concepts of openness measurement that differ to the traditional approach. They only include data for a few countries, which mainly consist of industrialized economies, and/or only for a small number of years. Consequently, the outcome of empirical tests of potential associations between the degree of openness and other variables might be, in some cases, hampered. In clear contrast to this, the new data base of the degrees of openness to international trade based on the actual openness concept consists of roughly 20,000 entries. The data base represents the degrees of trade openness of 66 countries, which range from developing to highly industrialized economies, for a period of 14 years (1989 to 2002). This feature of the study is a strong contribution to economic research since it makes the improved adequacy in the indication of trade openness available to many different empirical analyses. The empirical re-evaluation of the association between the degree of openness and the choice of exchange rate regimes in this contribution is based on regression analysis which contains up to 525 observations of 54 countries between the years 1989 and 2000. The test results indicate a positive and statistically significant correlation between trade openness and the likelihood of choosing a fixed exchange rate regime. This is clearly in line with the findings of the mainstream in the empirical research. Subsequently, the analysis of the relationship between the degree of trade openness and the selection of exchange rate regimes is extended to adhere to the ongoing debate in economic research as to when the Central and Eastern European countries (CEECs), which became member countries of the Economic and Monetary Union in May 1, 2004, are able to adopt the euro as their national currency. The results of a computable general equilibrium analysis suggest that if the Central and Eastern European countries meet the Maastricht criteria and the non-devaluation condition in the Exchange Rate Mechanism II, they could gain net benefits from the abolishment of their national currencies in the year 2008.
Kyoto and the carbon content of trade
(2010) Felbermayr, Gabriel; Aichele, Rachel
A unilateral tax on CO2 emissions may drive up indirect carbon imports from non-committed countries, leading to carbon leakage. Using a gravity model of carbon trade, we analyze the effect of the Kyoto Protocol on the carbon content of bilateral trade. We construct a novel data set of CO2 emissions embodied in bilateral trade flows. Its panel structure allows dealing with endogenous selection of countries into the Protocol. We find strong statistical evidence for Kyoto commitments to affect carbon trade. On average, the Kyoto protocol led to substantial carbon leakage but its total effect on carbon trade was only minor.
The bazaar economy hypothesis revisited : a new measure for Germany's international openness
(2007) Wang, Lars; Belke, Ansgar; Mattes, Anselm
In this paper we argue that traditional measures of openness of an economy usually overstate the actual degree. This is due to the fact that traditional export or import shares are measured as a share of the gross domestic product. The former are expressed in gross terms, the latter in value added terms. In this way the actual interdependences between economies are overstated. We develop a new value based openness indicator that includes interregional and interindustrial dependencies. Based on a Leontief production system and input-output-tables we argue that export-induced imports of intermediate parts must be subtracted of the value of exports in order to obtain the real value added in the export sector. The same reasoning applies to the import side. We use these measures of actual openness to calculate openness indicators for Germany using GTAP data. We show that traditional measures of openness exaggerate the actual openness and argue that these new indicators are an important contribution to the debate about the German ?bazaar economy?.