Trade and flow of value in global value chains

Abstract

This paper examines flow of value that goes with trade flows in global value chains (GVCs) by a residence‐based domestic value‐added trade measure. Accordingly, the paper puts forward a concept of residence‐based domestic value‐added exports from activity domains and develops a corresponding trade measure. Export activities of G20 economies are scrutinized empirically, with which sizeable differences are observed between figures in the proposed residence‐based domestic value‐added trade measure and the conventional domestic value‐added trade measure. This calls for new measures, to which the present study responds. It has been demonstrated that the developed G20 gains persistently in residence‐based domestic value‐added exports, increasing from the conventional domestic value‐added exports measure. Whereas trade performance of the developing G20 deteriorates with considerably reduced surpluses in the new measure. Considerable additional value flows out from developing to developed economies in GVCs. Developed economies continue to gain from international trade as a matter of fact.