American University Global Value Chains Economics Paper

A large percentage of world trade is in intermediate inputs, and global value chains (and disruptions of those supply chains) are increasingly in the news. In this exercise, you will analyze the importance of global value chains for a country of your choosing.

The GVC participation index, which estimates how much an economy is connected to global value chains for its foreign trade, is comprised of two components, the backward participation index and the forward participation index. The backward participation index measures to what degree a country relies on imported intermediate inputs to produce their output: Foreign Value Added Content of Exports / Total Exports

where the foreign value added content of exports can alternatively be thought of as imports of intermediate inputs used in exports. The forward participation index measures to what degree the country exports intermediate inputs to third countries for further processing and export:

(Domestic Value Added Exported to Partners Which are Re-Exported) / TotalExports

For more information on how GVC participation is measured, I recommend this WTO report:

https://www.wto.org/english/res_e/statis_e/miwi_e/explanatory_notes_e.pdf

Directions:

Step 1: Choose a country included in the OECD’s Trade in Value Added Database (https://stats.oecd.org/ ), choose the “international trade and balance of payment theme”, and look for the option “trade in value added”).

Step 2: Collect your data. Collect data to answer the following questions:

1. How has your countries participation in global value chains changed over time? How has its place in the global value chain (does it rely on imported intermediate inputs or is it providing intermediate inputs?) changed over time.
2. Which sectors rely more heavily on global value chains? Which countries play the most important role in your chosen country’s global value chain?

Step 3: Write your report.

Make sure you include in your written assignments any charts/figures/tables you create, as well as the description of how the data used in this analysis is calculated, and your interpretation of your analysis. Also include your analysis of how you think the Covid pandemic might impact your country’s GVCs moving forward. As always, include any necessary citations in your work. There is no word limit for the final report, but I think it needs to be 2-4 pages. Please remember to always include data.