A presentation by Mahdi Ghodsi at the ETSG conference in 2014.

1. Up or down the value chain? The comparative analysis of
the GVC position of the economies of the new EU member
Jan Hagemejer
University of Warsaw and National Bank of Poland
Mahdi Ghodsi
University of Warsaw and Universita Cattolica del Sacro Cuore
ETSG Conference
Munich, Germany
September 13, 2014

2. Agenda
1. Introduction and Motivation
2. The upstreamness measure
3. The upstreamness of the New Member States
4. Conclusions

3. 1- Introduction and Motivation
• Trade Liberalization, Fragmentation, and
Technology Absorption

4. 1- Introduction and Motivation
• Imports of NMS

5. 1- Introduction and Motivation
• Exports of NMS

6. 1- Introduction and Motivation
• Faster growth rate of intermediates imports
than the growth of final goods

7. 1- Introduction and Motivation
• Using WIOD database, the study on NMS is
focusing on the following issues:
1. Stylized facts on the liberalization processes
2. Disentanglement of structural changes
3. Evolution of trade in final vs intermediate goods
4. Calculation and analysis over upstreamness

8. 2- The upstreamness measure
• Output upstreamness elaborated by Antras et al. (2012): how effective the
production in one sector is in the production of other sectors to be finally reached to
the final consumption by households, government and investors (HGI).
• In order to find out how much a product is upstream, we can use a framework to
calculate the stages within which a product is used as direct or indirect input of
production supply chain to finally reach WGI as final consumption.
• Two approaches for calculation:
1. Treating the whole world as one closed economy (Miller et al., 2013)
2. Calculation within each country considering trade flows (Antras et al., 2012)
• Advantages of first approach:
1. No simplifying assumption that the shares of intermediate products in production are equal to
the shares of these products in exports and imports across countries
2. First approach shows the distance from global final demand – good for global comparison
3. Distinguishing between interindustry and intraindustry trade

9. 2- The upstreamness measure
Table 1: Differences between the two measures
Dep: residuals
1
2
3
4
5
High_income
0,0266***
0,0146***
(0,0025)
(0,0026)
CEEC
-0,00481
-0,0223***
(0,0027)
(0,0029)
EU15
-0,0188***
-0,0309***
(0,0025)
(0,0026)
China
-0,218***
-0,205***
(0,0069)
(0,0069)
US
-0,00804
0,0100
(0,0066)
(0,0067)
openness
0,0986***
0,0888***
0,0987***
(0,0056)
(0,0059)
(0,0062)
Constant
-0,0366***
-0,00211
-0,0547***
-0,0622***
-0,0329***
(0,0022)
(0,0018)
(0,0024)
(0,0028)
(0,0026)
N
23056
23056
23056
23056
23056
R2
0,005
0,043
0,013
0,015
0,054
adj. R2
0,005
0,043
0,013
0,015
0,053
AIC
-19464,9
-20367,2
-19663,2
-19692,3
-20614,7
BIC
-19448,8
-20327,0
-19647,1
-19668,1
-20566,5
Standard errors in parentheses
* p < 0.05, ** p < 0.01, *** p < 0.001

10. 2- The upstreamness measure
• Differences between the two approaches:
• Regression result over the difference of the two approaches:
– The higher the openness, the higher is the gap
– Underestimation of country level approach for liberalized countries
– This gap is very large in China

11. 2- The upstreamness measure
• Similar results of both approaches:
– Increasing global upstreamness due to fragmentations
– Very upstream sectors (raw or resources): mining, metal and
chemical industry
– Very downstream (services): health and social services,
education, real estate, hotels and restaurants etc.
– Not much increase in upstreamness of agriculture and
construction
– Energy has shifted towards more downstream use

12. 2- The upstreamness measure

13. 2- The upstreamness measure
• Similar results of both approaches:
– Increasing global upstreamness due to fragmentations
– Very upstream sectors (raw or resources): mining, metal and
chemical industry
– Very downstream (services): health and social services,
education, real estate, hotels and restaurants etc.
– Not much increase in upstreamness of agriculture and
construction
– Energy has shifted towards more downstream use

14. 2- The upstreamness measure

15. 3- The upstreamness of the NMS
Overall upstreamness (left) vs upstreamness of manufacturing (right)
• Decreasing trend of NMS after 1999 is mainly because of Polish structure similarity to EU15’s
• Increasing share of services in output of NMS remains below that of EU15
• Big jump observed in RoW is mainly due to China (new WTO member state) and East Asian
countries

16. 3- The upstreamness of the NMS
Overall upstreamness of Exports vs Imports
• The relatively more closed countries would naturally be more downstream due to the overall
importance of domestic demand.
• Increasing overall trend in upstreamness of bothe exports and imports.
• Convergence of upstreamness between EU15 and NMS both in exports and in imports

17. 3- The upstreamness of the NMS
Geographical Bilateral upstreamness
• NMS and EU15 convergence in GVC:
– Intra-NMS trade becomes more and more downstream
– EU15 and RoW exports to NMS become increasingly upstream (similar to aggregates)
– EU15 downstream imports from NMS and upstream imports from RoW
– Since 2000, no big difference between NMS and EU15 exports to RoW

18. 3- The upstreamness of the NMS
NMS manufacturing export share
Almost 50% of NMS output is supplied by fours sectors: “Food, Beverages and
Tobacco” (over 15%), “Transport Equipment (14%)”, “Basic and Fabricated metals” (13%)
and “Electrical and Optical Equipment” (12%)

19. 3- The upstreamness of the NMS
Upstreamness of 4 major exporting sectors

20. 3- The upstreamness of the NMS
Upstreamness manufacturing of NMS (export weighted)

21. 4- Conclusions
• Trade liberalization after transition of 1990’s assisted in
structural changes of NMS
• Intermediates imports rather than exports
• Increasing trend of upstreamness globally
• NMS and EU15 Convergence in GVC
• Manufacturing as downstream, but becoming more
upstream during time
• Future research:
– Analysing how the position in the value chain is related to the
relative importance of domestic value added, technology transfer
and related productivity gains

22. Thank
you
for
your
attention