Figure 1: The Structure of a World Input-Output Table

||||||Input use|& val|ue added|||Fi|nal u|se|Total use|
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
||||C|ountry|1|· · ·|C|ountry|J|Country 1|· · ·|Country J||
||||Industry 1|· · ·|Industry S|· · ·|Industry 1|· · ·|Industry S|||||
|||Industry 1|Z<sup>11</sup><br>11|· · ·|Z<sup>1S</sup><br>11|· · ·|Z<sup>11</sup><br>1J|· · ·|Z<sup>1S</sup><br>1J|F <sup>1</sup><br>11|· · ·|F <sup>1</sup><br>1J|Y <sup>1</sup><br>1|
|Intermediate|Country 1|· · ·|· · ·|Z<sup>rs</sup><br>11|· · ·|· · ·|· · ·|Z<sup>rs</sup><br>1J|· · ·|· · ·|· · ·|· · ·|· · ·|
|||Industry S|Z<sup>S1</sup><br>11|· · ·|Z<sup>SS</sup><br>11|· · ·|Z<sup>S1</sup><br>1J|· · ·|Z<sup>SS</sup><br>1J|F <sup>S</sup><br>11|· · ·|F <sup>S</sup><br>1J|Y <sup>S</sup><br>1|
|inputs|· · ·|· · ·|· · ·|· · ·|· · ·|Z<sup>rs</sup><br>ij|· · ·|· · ·|· · ·|· · ·|F <sup>s</sup><br>ij|· · ·|Y <sup>s</sup><br>j|
|||Industry 1|Z<sup>11</sup><br>J1|· · ·|Z<sup>1S</sup><br>J1|· · ·|Z<sup>11</sup><br>JJ|· · ·|Z<sup>1S</sup><br>JJ|F <sup>1</sup><br>J1|· · ·|F <sup>1</sup><br>JJ|Y <sup>1</sup><br>J|
|supplied|Country J|· · ·|· · ·|Z<sup>rs</sup><br>J1|· · ·|· · ·|· · ·|Z<sup>rs</sup><br>JJ|· · ·|· · ·|· · ·|· · ·|· · ·|
|||Industry S|Z<sup>S1</sup><br>J1|· · ·|Z<sup>SS</sup><br>J1|· · ·|Z<sup>S1</sup><br>JJ|· · ·|Z<sup>SS</sup><br>JJ|F <sup>S</sup><br>J1|· · ·|F <sup>S</sup><br>JJ|Y <sup>S</sup><br>J|
|Va|lue added||V A<sup>1</sup><br>1|· · ·|V A<sup>S</sup><br>1|V A<sup>s</sup><br>j|V A<sup>1</sup><br>J|· · ·|V A<sup>S</sup><br>J|||||
|Gr|oss output||Y <sup>1</sup><br>1|· · ·|Y <sup>S</sup><br>1|Y <sup>s</sup><br>j|Y <sup>1</sup><br>J|· · ·|Y <sup>S</sup><br>J|· · ·||||

# Measurement

The main challenge facing the measurement of GVC arises from the fact that customs data, the standard source for international trade flows, provides information on where the transacted good or service was produced, but not on how it was produced, i.e., which countries contributed value to it. Similarly, customs data record where the transacted good is flowing to, but not how it will be used, i.e., whether it will be fully consumed (absorbed) in the importing country, or whether it will be re-exported after the importing country adds value to it. With the goal of tracing value-added trade flows across countries, a body of work has combined information from customs offi ces together with national Input-Output tables to construct global Input-Output tables. The most widely used world Input-Output tables are: (a) the World Input-Output Database (WIOD), a collaborative project led by researchers at the University of Groningen; (b) the OECD TiVA database, and (c) the Eora Global Supply Chain Database, constructed by a team of researchers at the University of Sydney. At a very broad level, this collaborative projects can be thought of as a “scaled up” version of product-level studies (such as Dedrick, Kraemer and Linden’s 2010 well-known case study of the iPod), attempting to break out the distribution of the financial value embedded in a product across the many participants in its supply chain. Figure 1 provides a schematic version of one such WIOT.<sup>2</sup> With these global Input-Output tables at hand, it is then straightforward to devise alternative measures to document the extent to which production process have become globalized in recent years, and the extent to which various countries and sectors participate in global value chains. At the world level, Borin and Mancini (2019) develop a natural measure of the importance of GVC trade in total international trade. Building on global Input-Output tables, they identify the share of a country’s exports that flow through at least two borders.<sup>3</sup> It is important to emphasize that

> 2 The WIOT in Figure 1 considers a world economy with J countries (indexed by i or j) and S sectors (indexed by r or s). In its top left J × S by J × S block, the WIOT contains information on intermediate purchases by industry s in country j from sector r in country i. In the table, these intermediate input flows are denoted by Zij<sup>rs.Tothe</sup> right of this block, the WIOT contains an additional J × S by J block with information on the final-use expenditure in each country j on goods originating from sector r in country i. These final consumption flows are denoted by Fij<sup>r</sup> in the table. The sum of the (J × S) + J terms in each row of a WIOT represents the total use of output of sector r from country i, and naturally coincides with gross output in that sector and country (denoted by Yi<sup>r).</sup>

> 3 See also Wang et al. (2013). Other important papers on the measurement of GVC participation include the pioneering work of Hummels et al. (2001), Johnson and Noguera (2012), and Koopman et al. (2014).

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