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Looking into global value chains: influence of foreign services on export performance

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Abstract

Using data from the OECD Inter-Country Input–Output database, we explore the impact of foreign services value added content of exports on export performance, specifically on duration of trade. Our data show that the share of foreign services content in manufacturing exports grows from 1995 to 2011, in a way similar to foreign goods content, and in contrast to the decreasing share of domestic services. Moreover, the share of foreign services value added content is larger for developing and emerging countries than for advanced countries. Our econometric findings confirm that foreign services value added embodied in manufacturing exports contribute positively to more resilient exports relationships, a positive effect which occurs for the three groups of manufacturing industries (high, medium and low technology industries) and, for each group, it is more pronounced for developing and emerging economies.

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Fig. 1

Source: Own elaboration from OECD-WTO TiVA database

Fig. 2

Source: Own elaboration from OECD-WTO TiVA database (color figure online)

Fig. 3

Source Own elaboration from OECD-WTO TiVA database

Fig. 4

Source Own elaboration from OECD-WTO TiVA database

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Notes

  1. For a review of empirical research on the impact of offshoring on productivity, see Amador and Cabral (2015).

  2. Tiva indicators of foreign and domestic services value added share of gross exports include construction, wholesale and retail, hotels and restaurants, transport and communications, finance, real estate and business services as well as public services, i.e. ISIC Rev. 3 Divisions 45 to 95.

  3. The countries included in each category are listed in Appendix Table 4.

  4. Methodological notes about the GCI are available at http://reports.weforum.org/global-competitiveness-index-2017-2018/appendix-a-methodology-and-computation-of-the-global-competitiveness-index-2017-2018/.

  5. As Nordas and Kim (2013) point out, this categorization is somewhat dated since most manufacturing sectors have high, medium and low-technology segments. Moreover, following Landesmann (2015) and Olczyk and Kordalska (2017), we remove code 23 (manufacture of coke, refined petroleum products and nuclear fuel) from our analysis to avoid distorted results. As the authors point out, the results are quite sensitive to the inclusion of this industry because of its very high degree of vertical specialisation, high energy intensity, high labour productivities, etc.

  6. Here, “Foreign goods” refer to value added originating from all other industries than services: agriculture, mining, manufacturing and utilities (ISIC Rev. 3 Divisions 01 to 41).

  7. In all estimations of Table 1, previous export experience is captured by the duration of the previous spell. As this variable is coded as zero for spells where no information about the duration of the preceding spell is available, these spells, which are the first of several spells observed during the period, are eliminated from the sample. The estimation results are robust to alternatively considering the number of previous spells as a proxy for previous experience.

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Acknowledgements

This work is supported by the State Research Agency (Spanish Ministry of Economy, Industry and Competitiveness) Project ECO2016-78,422-R, co-financed with FEDER funds. The authors want to thanks to Maximino de Cos Hernando for his contribution to this analysis.

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Authors and Affiliations

  1. Universidad De Castilla-La Mancha, Toledo, Spain

    Carmen Díaz-Mora, Rosario Gandoy & Belén González-Díaz

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  1. Carmen Díaz-Mora
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  2. Rosario Gandoy
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  3. Belén González-Díaz
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Correspondence to Carmen Díaz-Mora.

Appendix

Appendix

See Tables 3, 4, 5, 6, 7 and 8.

Table 3 List of activities
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Table 4 List of countries included
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Table 5 Dependent and explanatory variables: definition and sources
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Table 6 Descriptive statistics for the explanatory variables
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Table 7 Export survival and foreign services value added. Logit model estimation results (including domestic services value added embodied in manufacturing exports)
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Table 8 Export survival and foreign services value added (sample split by services categories). Logit model estimation results (including domestic services value added embodied in manufacturing exports)
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Díaz-Mora, C., Gandoy, R. & González-Díaz, B. Looking into global value chains: influence of foreign services on export performance. Rev World Econ 154, 785–814 (2018). https://doi.org/10.1007/s10290-018-0326-4

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