How exposed are countries and sectors to GVC risks? GVC participation matters for answering this question. Standard approaches either overstate the degree of backward integration or underestimate the involvement of some industries, especially services, in Global Value Chain (GVC) activity. To correct these biases, this paper proposes a novel comprehensive method to measure GVC participation using Inter-Country Input-Output (ICIO) linkages in both trade and output and shows that these improvements in methodology matter from a macroeconomic perspective. GVC integration, as measured by the indicators, decreases the exposure to domestic shocks and increases that to global shocks. The paper also finds that exposure to shocks is complex: in most countries and sectors, output is simultaneously exposed to supply and demand shocks. This two-sided exposure suggests that disruptions may not be easily managed by unilateral policy attempts at forcing a reorganization of buyers-seller relationships.
Details
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Author
Borin,Alessandro, Mancini,Michele, Taglioni,Daria
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Document Date
2021/09/28
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Document Type
Policy Research Working Paper
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Report Number
WPS9785
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Volume No
1
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Total Volume(s)
1
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Country
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Region
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Disclosure Date
2021/09/28
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Disclosure Status
Disclosed
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Doc Name
Measuring Exposure to Risk in Global Value Chains
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Keywords
global value chain; development research group; process of trade liberalization; imported inputs; regional value chain; exposure to risk; country of origin; global supply chain; value of output; share of export; input output table; Research Support; across national border; value of good; share of trade; fragmentation of production; global production sharing; modes of participation; creation of value; international production chain; domestic value; domestic input; world level; intermediate input; backward linkages; total output; domestic economy; gross output; forward linkages; export sector; import intermediates; supply shock; foreign content; value added; input-output table; vertical specialization; foreign exporter; foreign input; foreign demand; international shipment; domestic shock; empirical analysis; global shocks; manufacturing sector; standard approach; third market; production process; customs datum; export activity; intermediate position; output data; empirical application; other sectors; world exports; cross-border trade; cross-border production; participating country; technology upgrading; professional service; account relationship; small fraction; empirical relevance; domestic output; domestic intermediate; domestic processing; macroeconomic perspective; standard measurement; domestic absorption; total trade; metal product; standard practice; data availability; external demand; comparable data; windshield wiper; global market; aggregation bias; foreign value; recent years; accounting framework; world trade; international engagement; export value; border crossing; vertical integration; methodological approach; export good; international border; Data Visualization; internal market; empirical work; production network; intermediate product; foreign shock; several times; future research; interest policy; participation base; general assessment; open access; development policy; export dynamics; sector exposure
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Citation
Borin,Alessandro Mancini,Michele Taglioni,Daria
Measuring Exposure to Risk in Global Value Chains (English). Policy Research working paper,no. WPS 9785,Paper is funded by the Knowledge for Change Program (KCP) Washington, D.C. : World Bank Group. http://documents.worldbank.org/curated/en/476361632831927312/Measuring-Exposure-to-Risk-in-Global-Value-Chains