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Nakgyoon Choi, Senior Research Fellow, Korea Institute for International Economic Policy: East Asian Value Chains and Determinants of Trade Patterns

2014-04-15
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The rise of global value chains has changed the trade and investment patterns in East Asia. This paper aims to analyze the East Asian value chains since the mid-1990s. Specifically, it investigates the determinants of trade patterns, using the indexes to show how the global value chains have deepened in East Asia. We calculated the indexes of global value chains related to upstreamness and downstreamness, using the methodologies proposed by Fally (2011), Fally (2012), Antras and Chor (2011), Antras et al. (2012), and Koopman et al. (2010). This paper uses the World Input-Output Tables which cover 41 countries and 35 sectors during 1996~2009. The global value chain indexes in case of East Asia and the rest of the world turned out to increase while the indexes of the EU and the NAFTA have not changed significantly. This paper uses the estimation methodology to deal with the panel dataset, some of which has a value of 0 or missing value. We also take into consideration the sample selection bias which Helpman et al. (2008) points out. It uses the Poisson Pseudo Maximum Likelihood (PPML) methodology which Silva and Tenreyro (2006, 2009), Anderson and Yotov (2009) proposed. The empirical results reveal that global value chain indexes well explain the trade in intermediate and finished goods. In case of East Asia, specifically, the elasticity of trade on the upstreamness index turned out to be the lowest while elasticity of trade in finished goods on downstreamness index turned out to be the highest.