Estimating Domestic Content in Exports When Processing Trade Is Pervasive
Coauthor(s): Robert Koopman, Zhi Wang.
The rise of China in world trade has brought both benefits and anxiety to other economies. For many policy questions, it is crucial to know the extent of domestic value added (DVA) in exports, but the
computation is more complicated when processing trade is pervasive. We propose a method for computing domestic and foreign contents that allows for processing trade. By our estimation, the share of domestic
content in exports by the PRC was about 50% before China's WTO membership, and has risen to over 60% since then. There are also interesting variations across sectors. Those sectors that are likely
labeled as relatively sophisticated such as electronic devices have particularly low domestic content (about 30% or less).
Source: Journal of Development Economics
Koopman, Robert, Zhi Wang, and Shang-Jin Wei. "Estimating Domestic Content in Exports When Processing Trade Is Pervasive." Journal of Development Economics 99, no. 1 (September 2012): 178-189.