faculty of economics
and business
Comparative Advantage
in the Netherlands:
A Global Value Chain Perspective
Marcel Timmer
Groningen Growth and Development Centre,
University of Groningen
Ministerie van Financiën, 22 Januari 2014
“Van iedere euro die we in Nederland verdienen,
komt zeventig cent uit het buitenland.”
aldus A. Pechtold in “Henk, Ingrid en Alexander”
„want de totale waarde van onze export even groot
is als 70 procent van ons bbp”,
(bron: www.nrcnext.nl/blog/2012/02/28)
Van Micro naar Macro
Dit klopt als we alleen maar met NL inputs produceren.
MICRO case studies van producten laten echter internationale
fragmentering van productie zien en organisatie in global value
chains (GVC) (e.g. iPad; Duitse Porsche etc.)
Wat is het MACRO perspectief?
World Input Output Database (WIOD) project geeft voor het
eerst hier een antwoord. Europees project (2009-2012) geleid
door RUG.
Increasing fragmentation of production:
A typical car consists of parts and components
sourced worldwide
Deze presentatie
Wat is een Global Value Chain (GVC) vanuit macro-perspectief?
Hoe kunnen we de waarde die landen toevoegen aan GVCs
empirisch waarnemen?
Introductie GVC income measure
Bevindingen voor NL en EU
Wat zijn de beleidsimplicaties
Van een GVC perspectief op groei en internationale handel?
Van de empirische bevindingen?
The Traditional View
Increasing exports/GDP indicates competitive strength
Traditional comparative advantage analysis finds that:
NL RCA pattern is persistent over time: agriculture and
food; chemicals; flowers (e.g. De Groot, 2007).
Similar persistence for Europe as a whole (Di Mauro, 2010)
NL has advantage in low-skilled products, while China has
advantage in high-skilled products ? Really?
“It is not about what you sell,
but what you do”
Background studies
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”, forthcoming Journal of Regional Science,
Timmer, M.P., A.A. Erumban, B. Los, R. Stehrer and G.J. de
Vries (2014),"Slicing Up Global Value Chains", forthcoming
Journal of Economic Perspectives
Timmer (ed, 2012), “WIOD: concepts, construction and
applications”, WIOD working paper
Elucidating the concept of
Global Value Chain
accounting
Stylized Global Value Chain
(GVC)
countriesindustries
delivering
value
added
Identify GVC by
country and
industry where last
stage of production
takes place
Stylized Car GVC
Metal
Plastic
Car body
Business
services
CAR
Engine
Value added distribution of
output of final product
Country 1
Intermediate
goods
Capital and
labour
Domestic
intermediate
goods
Country 2
VA by
L2
Capital and
labour
Intermediate
goods
VA by
K2
VA by
L3
Domestic
intermediate
goods
Country 3
VA by
L1
VA by
K1
Capital and
labour
Final goods
for domestic
and foreign
demand
VA by
K3
Value added contributions to
German car GVC
100%
8%
90%
16%
13%
80%
70%
19%
21%
60%
23%
50%
Labour
elsewhere
Capital in
Germany
40%
30%
Capital
elsewehere
58%
42%
20%
10%
Value added
distribution of
final output
from German
transport
equipment
manufacturing
GVC
(in millions)
Labour in
Germany
Source:
Figure 1
0%
1995
2011
Beleids implicaties van een GVC
perspectief (1)
GVC denken:
Interdependentie
Sectoren (landbouw, manufacturing en diensten)
Bedrijven (bijv. indirecte exporten van MKB)
NL concurrentie kracht hangt af van
buitenlandse leveranciers
Wat is de markt? E.g. indirecte exporten naar China
Landen:
Noodzaak voor nieuwe maatstaven, e.g. bijdrage export
aan economie wordt overschat
A new competitiveness
measures
GVC income of a country is the value added by the
country in a particular product GVC by performing activities
in its production.
In work so far we focus on final manufacturing goods as
they are most fragmented.
In total 41 landen x 14 manufacturing product groups =
574 product GVCs
DATA World Input Output Database (WIOD): 41 landen,
1995-2011, nationale rekeningen gecombineerd met inputoutput tabellen.
Business functions in GVCs
But what type of activities in the global value chain add value?
Distinction between so-called business functions (smile curve)
pre-production;
production and
post-production activities,
Preliminary results, only EU
Proxy value added of business functions by the wages of
workers, classified by occupation.
Need mapping business functions to occupations
Occupations (2-digit ISCO88) by country and industry from the
EU labor force surveys.
Wage data by occupation from the structure and earnings
survey 2002
Smile curve
Pre-prod
Production
Post-prod
Mapping business
functions to occupations
1. Pre-production Business functions: Basic R&D, Design, Commercialization
Occupations: Professionals
Production
Business functions: Manufacturing, standardized services
2. Prod (low)
Occupations (production-low skilled): Service workers and shop
and market sales workers. Craft and related trades workers, Plant
and machine operators and assemblers, Elementary occupations
Occupations (production-high skilled): Technicians and associate
professionals
3. Prod (high)
Post-production
Business functions: Marketing, advertising and brand
management, specialized logistics, after-sales services
4. Post (low)
5. Post (high)
Occupations (post-production-low skilled): Clerks
Occupations (post-production-high skilled): Legislators, senior
officials and managers
Notes: Classification of occupations based on ISCO88. Authors’ mapping.
Source business function definitions: Sturgeon and Gereffi, 2009.
Value added contributions to
German car GVC
100%
90%
21%
35%
80%
70%
60%
21%
Elsewhere
Capital
50%
4%
7%
23%
40%
11%
5%
5%
8%
post (low)
15%
prod (low)
30%
20%
post (high)
27%
10%
0%
8%
9%
1995
2011
prod (high)
pre
Value added
distribution of
final output
from German
transport
equipment
manufacturing
GVC
GVC income shares by function
NL, All 574 manufactures GVCs
100%
90%
80%
34%
38%
70%
capital
60%
7%
50%
28%
6%
22%
production (low)
40%
30%
12%
20%
10%
0%
post-production (low)
12%
10%
9%
10%
12%
1995
2011
post-production (high)
production (high)
pre-production
Change in functional GVC shares,
1995-2011, NL compared
15%
10%
Capital
5%
post (high)
0%
post (low)
-5%
prod (high)
-10%
prod (low)
pre
-15%
EU27
NLD
BEL
FIN
DEU
SWE
CZE
Revealed Comparative Advantage
Revealed Comparative Advantage (RCA) defined as: share of
activity x in GVC income for country c relative to same share for
EU 27

c
c 
 GVCI x / ∑ GVCI x 

RCA =  EU 27 x
GVCI x
/ ∑ GVCI xEU 27
x
RCA bigger than 1 reveals a comparative advantage in that
activity
NOTE: Compared to EU 27 as a whole, not globally
Revealed Comparative Advantage
Revealed Comparative Advantage (RCA) defined as: share of
function x in GVC income for NL relative to same share for EU 27
RCA bigger than 1 reveals that NL has a comparative advantage
in that activity (NB Compared to EU 27 as a whole, not globally)
Main findings for NL:
RCA increasing over 1995-2011: post (high) and capital
RCA >1 in 2011: pre; post-high and capital
RCA in production activities is low and declining
Revealed Comparative Advantage
preproduction production
production
(low)
(high)
post (low) post (high)
capital
NLD
1995
2011
1.22
1.09
0.88
0.85
0.96
0.82
0.94
0.95
1.00
1.05
1.10
1.14
DEU
1995
2011
1995
2011
1996
2011
1995
2011
1.26
1.19
1.26
1.20
0.61
0.42
0.99
1.03
1.06
1.00
0.90
0.87
1.04
1.13
0.97
0.96
1.36
1.11
0.91
0.95
0.93
1.31
1.26
1.08
1.33
1.26
1.40
1.32
0.51
0.63
0.80
0.69
0.56
0.70
0.91
1.06
0.62
0.56
0.49
0.59
0.84
0.96
1.00
0.97
1.35
1.21
1.19
1.19
BEL
CZE
SWE
Revealed Comparative Advantage
preproduction production
production
(low)
(high)
post (low) post (high)
capital
NLD
1995
2011
1.22
1.09
0.88
0.85
0.96
0.82
0.94
0.95
1.00
1.05
1.10
1.14
DEU
1995
2011
1995
2011
1996
2011
1995
2011
1.26
1.19
1.26
1.20
0.61
0.42
0.99
1.03
1.06
1.00
0.90
0.87
1.04
1.13
0.97
0.96
1.36
1.11
0.91
0.95
0.93
1.31
1.26
1.08
1.33
1.26
1.40
1.32
0.51
0.63
0.80
0.69
0.56
0.70
0.91
1.06
0.62
0.56
0.49
0.59
0.84
0.96
1.00
0.97
1.35
1.21
1.19
1.19
BEL
CZE
SWE
Concluding remarks
Internationale fragmentering van productie impliceert
concurreren op activiteiten, niet op sectoren.
Nieuwe maatstaven gebaseerd op toegevoegde waarde
van activiteiten: GVC income.
Bevindingen
NL en EU als geheel hielden stand tot 2008, maar geen
herstel na de shock
Functionele specialisatie binnen de EU
Voor NL: voortgaande specialisatie in post-productie
activiteiten (met hoog skill gehalte) en capital
Beleids implicaties (2)
Sturen op activiteiten (R&D, design, logistics, finance, branding,
market exploration) ipv sectoren? Human capital agenda?
Clustering versus fragmentering van activiteiten (zie Baldwin,
OECD (2012), “Interconnected Economies”)
Managen effecten handel op inkomensverdeling (hooggeschoolde arbeid en kapitaal ‘winnen’ meer)
Verbeterde statistieken
voortbouwend op bijv. Kuypers, Lejour, Lemmers, Ramaekers
(CBS/CPB, 2012): “Kenmerken van Wederuit-voerbedrijven”
Statistieken over business functions (EU initiatief)
World input-output table (WIOT)
France
Germany
USA
France
M ··· S ··· C M ··· S ··· C M ··· S ··· C
France
Germ
USA
Tot
H
I
G H
I
G H
I
G
Mining
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
·····
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Steel manuf
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
·····
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Car manuf
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Mining
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
·····
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Steel manuf
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
·····
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Car manuf
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Mining
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
·····
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Steel manuf
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
·····
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Car manuf
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Value added
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Total
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Germany
USA
METHOD
> Decomposition method based on mathematical input-output technique
involving the “Leontief-inverse”
The value added contributions (v) of factors in industry i in country j are
given by
v=P(I-A)-1f
P diagonal matrix of value-added as ratio of gross-output (ij x ij),
A matrix of intermediate input use (foreign and domestic) (ij x ij),
I the identity matrix; and (I-A)-1 the so-called Leontief inverse (ij x ij)
f output of final manufactures (for consumption and investment
demand) (ij x 1)
NB Use of Leontief inverse insures that all stages of production
are taken into account