This paper provides both a conceptual framework for decomposing a country's gross exports into value-added components by source and a new bilateral database on value-added trade.Our parsimonious framework integrates all previous measures of vertical specialization and value-added trade in the literature.To illustrate the potential of the decomposition, we present a number of applications including re-computing revealed comparative advantages and constructing an index to describe whether a country-sector is likely in the upstream or downstream of global production chains.
Well-functioning financial sectors are critical in mobilizing resources, stimulating investment, and at the same time helping firms (and households) better manage their risks.As shown in Appendix 3C, the business services sector covers a variety of critical of services activities, ranging from software consulting and data processing to management consultancy, engineering and R&D services.Intensive use of these modern services can help manufacturing firms increase productivity, reduce the cost of doing business, expand their choices within a longer geographic distance, differentiate their products from those of their competitors, 2 strengthen their after-sale customer services, etc. 3 USITC (2013) shows that business services accounted for nearly half of all services purchased by manufacturing sectors in the U.S. in 2008.Our first hypothesis is that, while the overall effect of services development on the performance of manufacturing sectors can be ambiguous, its effect is more likely to be positive for manufacturing sectors that use services inputs more intensively.Furthermore, we distinguish embodied domestic services inputs from embodied foreign services inputs.When domestic firms have access to foreign services, they may at least partially bypass their own inefficient services provision by relying more on imported services inputs.As our second hypothesis, we expect to see a more positive effect of access to foreign services inputs on manufacturing export performance in countries with lower levels of domestic services development.We develop a methodology to quantify the indirect role of services in international trade in goods using a method developed by Koopman, Wang, and Wei (2014) and Wang, Wei, and Zhu (2013) that generalizes the vertical specialization measures proposed by Hummels, Ishii and Yi (2001).We use revealed comparative advantage (RCA) to measure the competitiveness of manufacturing sectors.Following Koopman, Wang, and Wei (2014) and Wang, Wei, and Zhu (2013), we improve on the traditional Balassa (1965) RCA and construct new measures of RCA based on domestic value added in gross exports by taking into account both domestic production sharing and international production sharing.In our econometric analysis of the impact of services development on RCA of manufacturing sectors, the key explanatory variable is the interaction between a measure of the development of 2 To differentiate a product from others, firms need to invest more in R&D, quality-upgrading, and advertisement.The groups of manufacturing sectors with high embodied financial and business services as listed in Appendix 4 indeed produce more differentiated products than those sectors with low services input intensity.In addition, combining pure manufacturing and after-sale services is also a way to differentiate itself from competitors. 3See the next section for discussion in the literature on how producer services may affect firms' productivity.
In this paper, we adopt a cross-country perspective to examine the evolution of capital flows into China, both in terms of volumes and composition. China`s inflows have generally been dominated by foreign direct investment (FDI), a pattern that appears to be favorable in light of the recent literature on the experiences of developing countries with financial globalization. We provide a detailed documentation of the evolution of China`s capital controls, a proximate determinant of the pattern of capital inflows. We also discuss a number of other intriguing hypotheses that attempt to capture the deeper causes underlying China`s approach to capital flows. In particular, we argue that some popular mercantilist-type arguments are inconsistent with the facts. We also analyze the recent rapid rise of China`s international reserves and discuss its implications. Contrary to some popular perceptions, the dramatic surge in foreign exchange reserves since 2001 is mainly attributable to non-FDI capital inflows, rather than current account surpluses or FDI.
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This short essay surveys recent literature on the competitive saving motive and its broader economic implications. The competitive saving motive is defined as saving to improve onei¯s status relative to other competitors for dating and marriage partners. Here are some of the key results of the recent literature: (i) cross-country evidence show that greater gender imbalances tend to correspond with higher savings rates; (ii) household-level evidence suggest that: (a) families with unmarried sons in rural regions with more skewed sex ratios tend to have higher savings rates, while savings rates of families with unmarried daughters appear uncorrelated with gender imbalances; and (b) savings rates of families in cities tend to rise with the local sex ratio; (iii) rising sex ratios contribute nearly half of the rise in housing prices in the Peoplei¯s Republic of China; and (iv) families with sons in regions of greater sex ratios are more likely to become entrepreneurs and take risky jobs to earn more income.
In a general equilibrium in which bribe-extracting bureaucrats can endogenously choose regulatory burden and delay, the effective (not just nominal) red tape and bribery can be positively correlated across firms. Using data from three worldwide firm surveys, this paper finds evidence consistent with this hypothesis. Firms that pay more in bribes are also likely to spend more, not less, management time with bureaucrats in negotiating regulations. They also face a higher, not lower, cost of capital.
The recent media and political attention on service outsourcing from developed to developing countries gives the impression that outsourcing is exploding.As a result, workers in industrial countries are anxious about job losses.This paper aims to establish what are the hypes and what are the facts.The results show that although service outsourcing has been steadily increasing it is still very low, and that in the United States and many other industrial countries "insourcing" is greater than outsourcing.Using the United Kingdom as a case study, we find that job growth at a sectoral level is not negatively related to service outsourcing.
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