GVCs and Productivity: Issues and the Role of Policy

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Information about GVCs and Productivity: Issues and the Role of Policy

Published on July 12, 2016

Author: Structuralpolicyanalysis

Source: slideshare.net

1. João Amador OECD Productivity Forum Lisbon 7-8 July 2016 GVCs and Productivity: Issues and the Role of Policy The Landscape of International Traders, Transaction Costs and Networks of Value Added Trade

2. 2 • Outline I. The landscape of international traders II. Transaction costs between firms III. Networks of value added trade OECD Productivity ForumJuly 2016

3. 3 • The landscape of international traders Four facts… • Biggest exporters take a disproportionate share of total exports • The landscape of international traders is diverse • Exporters are more productive than non-exporters and those in GVCs are even more productive Correlation vs causality (self-selection; learning by exporting) • GVCs became the paradigm for the organization of world production and they are intrinsically complex July 2016 OECD Productivity Forum

4. 4 • The landscape of international traders Biggest exporters of goods and services represent a much smaller share of exports of domestic value added July 2016 OECD Productivity Forum Assumption: intermediate costs (exc. cost of capital) proportionally distributed along exports and domestic sales. (all exporters)

5. 5 • X G X G X G M S M G M S M G Exporter GS X S X S X S X S X G M G M S M S M G Simple S exporter Two-way S trader X S X S X S X S M G M S M S M G Simple G exporter Two-way G trader X G X G X G X G Minor trader Simple G importer Simple S importer Importer GS M G M S M S M G The landscape of international traders is very diverse, part of them take part in GVCs The landscape of international traders July 2016 OECD Productivity Forum i= X – Exports; M – Imports; j= G – Goods; S – Services Threshold by firm - Share i,j > 10% of turnover GVCs Four-way trader

6. 6 • The landscape of international traders Each type of trader has different relevance in terms of total trade July 2016 OECD Productivity Forum Number top – share of total trade, bottom – share of total traders 2,6 46,4 Minor trader 0,8 0,2 1,7 5,1 0,8 0,6 17,9 2,0 0,3 0,8 0,8 9,6 5,6 0,3 0,3 Simple G importer Simple S importer Importer GS 18,5 Simple G exporter Two-way G trader X G, MS 7,8 43,4 X G, M S, M G 12,5 0,7 2,3 0,1 Simple S exporter Two-way S trader X S, M S, M G 3,6 X S, MG 12,5 0,7 0,4 0,1 0,1 Exporter GS X S, X G, M S, M G 0,4 X S, X G, M G X S, X G, M S 0,5 i= X – Exports; M – Imports; j= G – Goods; S – Services Threshold by firm - Share i,j > 10% of turnover

7. 7 • The landscape of international traders Each type of trader shows different productivity July 2016 OECD Productivity Forum Apparent median labour productivity relatively to median traders productivity 0,94 0,89 0,95 0,69 Minor trader Simple G importer Simple S importer Importer GS 0,98 1,30 1,07 1,04 Simple G exporter Two-way G trader X G, MS X G, M S, M G 1,26 1,29 1,59 1,16 Simple S exporter X S, MG Two-way S trader X S, M S, M G 1,22 1,32 1,33 1,51 Exporter GS X S, X G, M G X S, X G, M S X S, X G, M S, M G i= X – Exports; M – Imports; j= G – Goods; S – Services Threshold by firm - Share i,j > 10% of turnover

8. 8 • Transaction costs between firms There are both global and domestic value chains • The mechanisms that drive higher productivity in exporting firms should also operate domestically (literature on the boundaries of the firm) • … therefore, it is important to reduce the transaction costs between firms in the economy • The framework costs play a role (e.g. judicial, licencing) • … therefore, the structural reform agenda proves its relevance • The performance of the services sector (becoming more and more tradable) is important, notably to supply intermediation and risk management services July 2016 OECD Productivity Forum

9. 9 • Transaction costs between firms An example: Management of the supply chain • With GVCs the need to follow best practices in global supply chain management has intensified • Buying organizations are becoming increasingly accountable for what goes on in their supply chain (certification, reputation costs) … this burden weighs heavily on firms • Specific services offer access to the information needed to support the decision-making process and effectively manage the supply chain risk … lower procurement costs and lower risk (more competition) July 2016 OECD Productivity Forum

10. 10 • A network approach to aggregate trade in value added Network analysis • GVCs are intrinsically complex because there are multiple relations between value added users and suppliers in GVCs, thus, network theory offers the right set of tools for analysis. • Network graphs highlight relevant features of complex data, notably, the main users and suppliers of value added in GVCs and their interconnections. • These tools include node level measures and aggregate measures that describe the topological properties of the network. July 2016 OECD Productivity Forum

11. 11 • A network approach to aggregate trade in value added Setting-up the network (Amador & Cabral, 2016) • Nodes (40 countries in the WIOD database) , period 1995-2011, 35 sectors • Unweighted (binary) network. • The criterion for the existence of an edge is defined to reflect the importance of a source country s as a supplier of value added for the production of the exports of country r. • A foreign value added threshold is set at 1 percent of total gross exports of the user country. The existence of a clear interpretation for the orientation of the edge makes this network directed. More precisely: where AM=[

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