Development Economics Seminar

Bart Los (Groningen University)
Monday, 14 November 2016

The deceleration of world trade since 2011 has been widely discussed. How much is due to a reversal of international production fragmentation? And how much is due to decreasing demand for tradeintensive goods? We present a consistent framework that quantifies their relative importance. A central concept in our approach is the global import intensity (GII) of production. This is a novel measure of fragmentation which traces the imports needed in all stages of production. We study the period before and after the great trade collapse  based on an update of the world input-output database (WIOD). The increase in GII during the period 2000-2008 was due to a combination of two forces: high demand for goods and continuous international production fragmentation. Since 2011 fragmentation halted. Moreover, demand shifted to services which are less trade intensive than goods,
in particular in China. We argue that lower trade ratios are likely to remain in the near future. Joint with Marcel P. Timmer, Bart Los, Robert Stehrer and Gaaitzen J. de Vries**

** Timmer, Los and de Vries: University of Groningen, Faculty of Economics and Business, Groningen Growth and Development Centre; Stehrer: Vienna Institute for International Economic Studies (wiiw).