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Quantifying International Production Sharing at the Bilateral and Sector Level

Recent research by Koopman, Wang and Wei (AER, February 2014) has provided a framework to decompose a country's total gross exports into four parts: (a) exports of domestic value-added that are eventually absorbed abroad, (b) exports of domestic value added that eventually return home, (c) foreign value added embedded in the country's exports, and (d) pure double counted items due to intermediate goods crossing borders multiple times. While the KWW framework already has useful applications, many other applications would need decompositions at the sector, bilateral, or bilateral sector level. Such generalizations are challenging. In this paper, we overcome these challenges and derive a decomposition methodology appropriate for these levels. We present a number of results based on applying our methodology to the World Input-Output Database (WIOD) for 40 countries and 35 industries from 1995 to 2011.

Recent research by Koopman, Wang and Wei (AER, February 2014) has provided a framework to decompose a country's total gross exports into four parts: (a) exports of domestic value-added that are eventually absorbed abroad, (b) exports of ...