United States International Trade Commission

Abstract

This paper extends quantitative measures of vertical specialization (VS and VS1) proposed by Hummels, Ishii, and Yi (2001) into a framework that includes many countries based on an international input-output model. It not only distribute foreign value-added in a country’s exports to its original sources, but also further decompose domestic value-added in a country’s exports into direct exports and indirect intermediate exports via third countries, thus completely “slice of the value-chain”. This extended measure of vertical specialization allows us to estimate each country’s net contribution of value-added in the East Asia production network at industry level thus provide systematic quantitative evidence for the nature and growth of value chain in the East Asia production network during the 1990s. Our main data source is the Asian international Input-Output tables (AIO) compiled by the Institute of Development Economies (IDE). It includes 9 major economies in East Asia (Japan, China, Korea, Taiwan, Singapore, Thailand, Malaysia, Indonesia, and Philippine) plus the United States. Our results show that East Asia developing economies (China and ASEAN-4) are more deeply integrated into the value-chain of East Asia manufacturing production network in the 90’s, indicated by the dramatic increase of their share of value-added contained in final goods that East Asia supplied to the U.S. markets and their increased indirect value-added exports via other neighboring countries, despite the continuing dominance of Japan and NIE-3. We also report interesting heterogeneity of value chain across sectors: the electronic industry is most dynamic and well integrated global production network, and the value share become relative evenly distributed among East Asian economies in 2000 than that in 1990, while automobile production still mainly involve Japan and Korea by 2000 with developing Asia just start to show up in the chain. Value chain of wearing apparel is more concentrated in Asia developing countries with the value-added production shift from Asian NIE and Japan and rest of the world during the studied period.

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