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GTAP Resource #3124

"Vertical Specialization in World Trade: An Analysis Using the GTAP 7 Database"
by Ludena, Carlos, José Elías Durán Lima and Andrea Pellandra

Vertical specialization is defined as production occurring in multiple and sequential stages, where two or more countries provide value added at different stages of the production process and at least one country uses imported inputs in the portion of production that is exported. Using the GTAP 7.0 database, and the methodology developed by Hummels, Ishi and Yi (1999, 2001), we calculate vertical integration indexes for 94 countries and 57 sectors. The results show the increasing importance of vertical integration in world trade, which in 2004 averages 24%, with a higher incidence for developing countries, which show a higher percentage of intermediate inputs in their exports, with sectors such as motor vehicles, electronics and textiles showing highest levels of vertical integration. Additionally, we disaggregate vertical specialization indexes by country of origin, focusing especially on Latin America. Our results show that even though intraregional trade in Latin America is known to have lagged, trade in vertically specialized goods is mostly intraregional for most countries, pointing to the importance of intra-Latin American value chains. The availability of input-output data disaggregating the origin of intermediate inputs would be important to confirm these findings.

Key Words: Vertical integration, product sharing, Vertical specialization

Resource Details (Export Citation) GTAP Keywords
Category: 2009 Conference Paper
Status: Published
By/In: Presented at the 12th Annual Conference on Global Economic Analysis, Santiago, Chile
Date: 2009
Created: Pellandra, A. (4/15/2009)
Updated: Ludena, C. (4/17/2009)
Visits: 2,700
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