International Economics
Parisa Mohajeri; Ali Asghar Banouei
Abstract
Traditional trade theories and/or “Trade-in-Goods” predict that exports can generate 100% value-added which has recently been debated by Trade-in-Tasks theories. The root of these debates are referred to the existing conventional macro-economic accounting, which is expressed that expenditure ...
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Traditional trade theories and/or “Trade-in-Goods” predict that exports can generate 100% value-added which has recently been debated by Trade-in-Tasks theories. The root of these debates are referred to the existing conventional macro-economic accounting, which is expressed that expenditure components of final goods including gross exports (GE) equals to total value is consumed in each country. It means that a country’s GDP is the sum of its domestic final demand including GE. Generating 100% value added in domestic final demand may hold true but GE due to double counting may not generated 100% value added for the domestic economy. In addition to that domestic value added (DVA) has a nice property with Vertical Specialization (VS) in such a way that the sum of their shares are equal to one and therefore, can measure the degree of VS in trade. In this article, we take this issue as a starting point and for the first time try to analyze it with the following questions: What amount of DVA should be attributed to GE from Iran? What is the relationship between DVA and VS? We apply two methods of Hypothetical Extraction (HEM) and VS. Using the latest Input-Output Tables (IOTs) of 2011 and 2001 in Iran. The overall findings are as follows: One- the share of DVA in GE in 2001 is 95.02%, downs to 93.33% in 2011 and the shares of residual as an overestimation of GE are 4.98% and 6.67% for each year respectively. Second there is an inverse relationship between DVA and VS shares for both years. Third- the considerable large shares of DVA followed by small shares of VS suggest that Iranian economy is at the beginning of production chains with non-symmetric trade pattern.
