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GTAP Resource #3610

"What does the Measurement of Factor Content Mean for the Policy Analysis of Trade?"
by Stone, Susan, Ricardo Cavazos Cepeda and Anna Jankowska

Accounting for factor content of imported intermediates has a large impact on a country’s measured factor content of trade. The evidence shows that factor content patterns are undergoing some fundamental changes. For example, while traditional methods of factor content calculations show emerging econmies have a trade surplus in less-skilled intestive goods, the growth is in skill-intesnive sectors. Following the work of Trefler and Zhu (2000), we use Input-Output tables from the GTAP database to calculate the factor content specifically including the resources embodied in imported intermediate inputs. We apply this method to a number of country’s at the sector-level of trade. We find that this often changes the direction of deficit or surplus in any given sector. For example, the trade balance of skilled-labour US services trade changes significantly when imported intermediates are accounted for. This outcome calls for more careful analysis of the broad measures used in trade. We argue that trade patterns are as reliant on the cost of moving goods and tasks, as they are on the particular endowment structure of an economy. Acknowledging the role of intermediate goods in understanding a country’s trade position is only the first step. What remains a challenge for policy makers is the need to reconcile the seemingly opposing trends of the domestic (i.e. geographic specific) determination of employment and wages with the international (i.e. non-geographic specific) determination of the movement of goods and services and location of tasks.

Resource Details (Export Citation) GTAP Keywords
Category: 2011 Conference Paper
Status: Published
Date: 2011
Created: Stone, S. (4/15/2011)
Updated: Stone, S. (4/27/2012)
Visits: 1,564
- Economic development
- Labor market issues
- Technological change
- The GTAP Data Base and extensions

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Access Globalisation, Comparative Advantage and the Changing Dynamics of Trade at,3746,en_2649_37431_48979161_1_1_1_37431,00.html

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