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Economics 441: International Trade

Summer 2021

Graded Problem Set #2

Global value chains and the production fragmentation

During our lecture on how firms decides to go abroad we introduced the concept of Value Chains. When crossing more than two borders, we have Global Value Chains (GVCs). In the lecture we have seen various measures of country participation to the GVC.

Use the assigned country i and country k. Be ready to use a spreadsheet, like Google Sheet or Excel from the list and.

1) (5 points) For your country i use the OECD-WTO database TiVA (see below for the URL) and for the period 2005-2015 prepare one single time-series graph for the following GVC or GVC-related indexes – one graph for the shares (a-d) and one graph for the indexes (e-g):

a. Share of intermediate exports to gross exports

b. Share of intermediate imports to gross imports

c. Share of total intermediate trade (exports+imports) to gross total trade

d. Share of total intermediate trade to nominal GDP (use the OECD tab on National Accounts instead of in the top left corner, or see below)

e. The index of backward participation of country i (foreign value added in domestic gross exports, FVA, as percentage of domestic gross exports)

f. The index of forward participation of country i (domestic value added in foreign exports, DVX, as percentage of domestic gross exports)

g. General index of GVC participation (forward + backward participation)

h. Comment the following (maximum 500 words):

i. consistency among the different measures – for instance, between e)-f) and a)-b), or between d) and g) – and weaknesses of these measures with respect to what was discussed in class (regarding the difference between DC/DVA and VAX)

ii. something particular happened during the Great Recession 2008-09?

iii. (optional for extra points) compare backward and forward participation indexes from the TiVA data set with one other index that you can find in the World Bank WITS Dataset (see below)

2) (7 points) From the same database obtain indexes e., f. and g. in 1) – backward, forward and GVC participation – for country k for the same years. Produce one graph where you picture the differences for each one of the indexes e., f. and g. between the country i and country k. Comment those differences with respect to the upstreamness or downstreamness of the two countries.

3) (8 points) From the UNCTAD database (see below) download total FDI flows (both outflows and inflows) and FDI stocks for the available period 2005-2012:

a. Graph the sum of FDI flows and stocks as a percentage of GDP

b. Prepare a scatter plot between one of the GVC indexes in question 1) at your choice (the one that you think it is more appropriate among e. through g.) and one of the indexes of FDI flows or stocks as in a)

c. Comment the results according to your expectations (maximum 200 words)

Directions for your answers and suggestions:

i) Question 1 should be answered in one page for (a-d) and in one page for (e-g) where you present the graphs and then a short text to comment your results.

ii) For all questions you need to use a spreadsheet, like Excel or Google Sheet.

iii) You must hand in:

a. The text of your assignment with the graphs in a good and readable form (pdf is great) 

b. the spreadsheet that you used for your computations; you must mention your sources in the spreadsheet. Remember to report your sources also in the caption of the pictures that you insert in your text.

The websites and suggestions:

OECD TiVA database: https://stats.oecd.org/Index.aspx?DataSetCode=TIVA_2018_C1

Note: you need to use only the Tab 1 “TiVA December 2018: Principal indicators” and select as “Partner/country” the World; along the rows you find all the countries where you can identify the US and your country i. All the indexes you need can be selected in the “Indicator” field

OECD reference for GDP (you need to adjust for country and time period):

https://stats.oecd.org/index.aspx?queryid=60702

The WITS dataset from the World Bank can be found at the following link:

https://wits.worldbank.org/gvc/gvc-trade-table.html

Bilateral FDI flows from the UNCTAD website:

https://unctad.org/en/Pages/DIAE/FDI%20Statistics/FDI-Statistics-Bilateral.aspx

(careful: you need to allow pop-up from UNCTAD on your web browser)