faculty of economics
and business
Competitiviness Today:
a New View
Marcel Timmer
Groningen Growth and Development Centre,
University of Groningen
Presentation at RIETI World KLEMS SYMPOSIUM “GROWTH STRATEGY
AFTER THE WORLD FINANCIAL CRISIS”, Tokyo, May 20, 2014.
The OLD VIEW is based
on PRODUCTS
 The OLD VIEW on Competitiviness is based on PRODUCTS
 E.g. increasing value of exports is taken as indicator of
competitive strength of a country
 However International production fragmentation trend
accelerating since China’s entry to WTO in 2001
The NEW VIEW
“It is not about what you sell,
but what you do”
The NEW VIEW
The NEW VIEW is on ACTIVITIES in
GLOBAL VALUE CHAINS
Pre-prod
Production
Post-prod
Stylized Car GVC
Metal
Plastic
Countriesindustries
delivering
value
added
Car body
Engine
Business
services
CAR
Identify GVC by
country and
industry where last
stage of production
takes place
Value added distribution
of output of final product
Country 1
Capital and
labour
Intermediate
goods
Foreign
value
added
Domestic
intermediate
goods
Country 2
Capital and
labour
Intermediate
goods
Domestic
intermediate
goods
Country 3
Capital and
labour
Final goods
for domestic
and foreign
demand
Domestic
value
added
Increasing international production
fragmentation since 1995
.4
.6
.8
1
Foreign value
added share in
final output of
each of 14
manufacturing
industries in
40 countries
in 1995 and
2008
0
.2
Source:
Timmer et al.
(JEP, 2014)
0
.2
.4
.6
foreign VA share 1995
.8
1
Fragmentation outside regions
continuing after GFC in 2008
Note: Shares of regional (R) and global (G) foreign value added (FVA)
in value chains of final manufactures (34 countries-of-completion in EU, East
Asia and NAFTA); Source: Los et al. (2014), Journal of Regional Science
Shares in world GVC income,
all manufactures, 1995-2011 (%)
35.0
30.0
25.0
EU27
20.0
NAFTA
Japan
15.0
China
10.0
BRIIAT
5.0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
0.0
Note: Value added by regions in the production of final manufacturing goods. BRIIAT includes Brazil,
Russia, India, Indonesia, Australia, and Turkey. EU27 includes all European countries that have joined the
European Union. NAFTA includes Canada, Mexico and the US. Shares do not add up to 100% as the
remainder is the share of all other countries in the world. Source: Timmer et al. (2014)
Change in GVC Income by
production factor, 2008-1995
1,000,000
HS + K
LS + MS
750,000
500,000
250,000
0
-250,000
-500,000
US
EU 27
Japan
China
BRIIMT
Note: GVC Income by production factor (in million 1995 US$), change between 1995 and
2008, low- (L), medium- (M) and high-skilled (H) workers and capital (K),
measured as value added by regions in the production of final manufacturing goods.
Source: Timmer et al. (2014)
Concluding remarks
International fragmentation of production implies that
countries compete on basis of activities,
and no longer on basis of products or sectors.
 Implicates new thinking and policies, e.g.
 Trade policies: managing interdependencies between
countries
 Social policies: managing effects of trade on income
distributions
 Industrial policies: away from sectoral approach
 Statistical systems: new measures of competitiviness
More information
 Timmer, Marcel P., Bart Los, Robert Stehrer and Gaaitzen J. de Vries
(2013). “Fragmentation, Incomes and Jobs. An Analysis of European
Competitiveness.” Economic Policy 28(76):613–661.
 Los, B., M.P. Timmer and G.J. de Vries (2014), “How global are Global
Value Chains? A New Approach to Measure International Fragmentation”,
early view, Journal of Regional Science, DOI: 10.1111/jors.12121
 Timmer, M.P., A.A. Erumban, B. Los, R. Stehrer and G.J. de Vries
(2014),"Slicing Up Global Value Chains", Journal of Economic
Perspectives, Spring 2014, DOI:10.1257/jep.28.2.99
 All data and tables are available at www.wiod.org
 Short summaries of the papers can be found at Voxeu website
Global fragmentation dominates
regional fragmentation
RFVA and GFVA shares for selected countries (1995-2008, in %)
Source: Los et al. (2014), Journal of Regional Science