Globalization indicators
The Import Content Of Export
The case of the Netherlands
Marjolijn Jaarsma
Statistics Netherlands
April 27th 2004
Agenda
Globalization
Definitions, causes and characteristics
OECD introduction ‘globalization’ indicators
Monitoring globalization with new indicator
Import content of export
Internationalization of production processes
Problems in case of the Netherlands
Re-exports
New model
Economic globalization
New phase in international economic transactions,
characterized by increasing economic interaction
and integration among countries
Trade in goods and services increasingly matched
by international investment and multinational activity
International framework has changed
Standard (trade) indicators become less telling
New indicators needed, capable of looking beyond
surface FT and FDI
How to ‘capture’ globalization
Globalization indicator(s) developed by OECD
Focused on internationalization of production processes
rather than international trade and investment
‘Import Content Of Export’
The necessity to import in order to be able to export
Fraction import in an average unit of export
Relative integration with and dependence on
foreign production
A high import content of export not necessarily bad
Internationalization of production
Analysis of (internationalization of) production processes
Input-output tables (Netherlands)
Supply consists of intermediate deliveries and deliveries to
final demand (e + r)
Use consists of intermediate deliveries, import and primary
inputs
f
Total Uses input-output tables OECD Olisnet
(40*40
sectors)
Intermediate
deliveries
e
Use Agriculture Manufacturing Services
m
Supply
Agriculture
Manufacturing
Services
Import
Value added
Total
20
15
15
5
10
65
10
25
20
15
10
80
15
15
25
10
10
75
r
Export Domestic demand Total
15
20
10
5
5
55
5
5
5
5
5
25
65
80
75
40
40
300
Input-output analysis (1)
Sector output depends on final demand and intermediate
demand (which depends on...)
Output cycle
How much output must each sector produce?
x  I  A
1
 f
Leontieff inverse
Agriculture
Agriculture
20
Agriculture
0.31
Agriculture
15
Manufacturing
0.23
Manufacturing
15
Services
0.23
Services
65
Total output
Manufacturing
Manufacturing Services
Services
10
15
0.13
0.2
25
15
0.31
0.2
20
25
0.25
0.33
80
75
: total amount of final demand
I : unity matrix
A : matrix of technical coefficients
f
Amount of output each sector needs to produce in
order to satisfy final and intermediate demand
Input-output analysis (2)
Also imports needed to satisfy intermediate and
x  I  A  f
x  I  ( A  MC   f
final demand
Matrix MC resembles matrix A
1
1
d
Ratio of import flow to sector output
To Agriculture
Manufacturing
Services Export
Agriculture
Manufacturing
ServicesDomestic
From
demand
0.23
0.13
0.13
Agriculture
15
10
10
15
5
Agriculture
0.15
0.19
0.13
Manufacturing
10
15
10
15
5
Manufacturing
0.15
0.13
0.2
Services
10
10
15
15
5
Services
5
5
5
5
5
Non-competing imports
40
40
40
50
20
Total imports
Total imports
55
55
55
25
190
Vector x: Amount of Dutch output
Adjusted Leontieff inverse excludes imports
Leontieff inverse essential in OECD
indicator
Import content of export
‘Manual of economic globalization indicators’
Import Content of Export indicator
m  I  A
1

e
E
m : share of import per sector of sector output
I  A1 : Leontieff inverse (adjusted!)
e E
: share of export per sector in total sectoral export
Yields a single figure for whole economy
Requires the use of Total Uses input-output tables and Import
Flows tables (OECD Olisnet)
Import content of Dutch exports
ICOE risen from 33.6% in 1995 to 34.7% in 1997
Decline also found in FT – picked up after 1998
34.8
34.6
34.4
34.2
34.0
% 33.8
33.6
33.4
33.2
33.0
1995
1996
1997
1998
Problems
Differences classification
FT data: commodity flows
Input-output tables: economic activity
Re-exports
Focusing on m and e/E yields structurally lower ICOE
Important activity for Netherlands
Extracted from trade data and represented separately
Use Agriculture
Industry
Services
Export
Domestic demand
Total
Supply
Re-exports not reported separately for many other OECD
20
10
15
15
5
65
Agriculture
countries;
somehow
assigned
to
sectoral
exports
15
25
15
20
5
80
Industry
interpretation
20 ICOE25indicator10between countries
5
75
ServicesDifferent 15
5
15 not be 10
5
5
40
Import
Indicator
might
ready for cross-country
comparison
10
10
10
5
5
40
Value added
65
80
75
55
25
Total
300
New model – Adjusted ICOE
Original indicator
m  I  A 
1
e
E
m : Sum of all intermediate import flows entering sectors of
production (as a share of output)
Leaves out re-exports in m and E
!
Use Agriculture Manufacturing Services Export Domestic demand
From
Agriculture
Manufacturing
Services
Non-competing imports
Total
15
10
10
5
40
10
15
10
5
40
10
10
15
5
40
15
15
15
5
50
5
5
5
5
20
Expand composition vector m to include re-exports
Matrix of intermediate import flows (MC)
Matrix of re-exports, as a share of sectoral export
Further manipulations
Import content of export; subdivided for each intermediate delivery
Total
55
55
55
25
190
ICOE
Input-output tables 40*40
Clusters of ISIC rev. 3
economic
activity
1
15/19
2
20/22
3
4
5
6
7
8
23/25
26/29, 36, 37
30/33
34, 35
40/45
50/55
9
1/15, 60/99
9*9
Description
Food, beverages, tobacco, textile, textile products, leather and footwear
Wood, wood products, pulp, paper, printing and publishing
Coke, refined petroleum products, nuclear fuel, chemical products, rubber and
plastic products
Heavy manufacturing industry and remaining manufacturing activity
ICT sector
Transport equipment
Utility sectors and construction
Trade, repair, hotels, restaurants
Residual group: Agriculture, quarrying, transport, storage, post,
telecommunications, financial and business services, government and other services
Import content of export per delivery
To deliver 1 unit of export, sector j needs intermediate
deliveries from sector i, which consist for x% of imports
Intermediate deliveries sector 5 (ICT) receives from sector 5,
consist for 67.86% of imports
Useful for detailed analysis of internationalization production
1
1
2
3
4
5
6
7
8
9
2
3
4
5
6
7
8
9
26
49
39
52
36
40
36
36
28
40
28
35
36
32
31
39
30
27
66
68
35
51
57
58
48
55
55
48
41
48
39
54
42
39
48
44
80
75
77
80
68
68
74
79
77
64
66
56
64
68
43
65
88
56
2
2
2
2
2
2
1
2
1
1
1
1
1
1
1
1
1
1
29
29
49
31
37
37
17
17
11
Adjusted ICOE
Objective indicator
Monitoring globalization (1 figure) cross-country
Import content Dutch exports
Whole economy, including re-exports
38.0
37.8
37.6
% 37.4
37.2
37.0
36.8
1995
1996
1997
1998
Conclusion
Initial indicator overlooks part of Dutch trade
Adjusted calculations lead to higher import
content of Dutch exports
1995
1996
1997
1998
Including re-exports
37.6%
37.1%
37.8%
37.8%
Excluding re-exports
33.6%
33.9%
34.7%
33.6%
Difference
4.0
3.2
3.1
4.2
On aggregate basis, cross-country comparison possible
Disaggregated suitable for in depth analysis
The fraction imports in an average export unit
approximately 40%
Further questions
mjra@cbs.nl