Using the Input-Output Approach to Measure Participation in GVCs: The Case of Costa Rica

Discussion Papers

No.529

by David BULLÓN, Tayutic MENA, Bo MENG , Natalia SÁNCHEZ, Henry VARGAS, Satoshi INOMATA

May 2015

ABSTRACT

In order to illustrate how the input-output approach can be used to explore various aspects of a country’s participation in GVCs, this paper applies indicators derived from the concept of trade in value-added (TiVA) to the case of Costa Rica. We intend to provide developing countries that seek to foster GVC-driven structural transformation with an example that demonstrates an effective way to measure progress. The analysis presented in this paper makes use of an International Input-Output Table (IIOT) that was constructed by including Costa Rica’s first Input-Output Table (IOT) into an existing IIOT. The TiVA indicator has been used to compare and contrast import flows, export flows and bilateral trade balances in terms of gross trade and trade in value-added. The country’s comparative advantage is discussed based on a TiVA-related indicator of revealed comparative advantage. The paper also decomposes the domestic content of value added in each sector and measures the degree of fragmentation in the value chains in which Costa Rica participates, highlighting the partner countries that add the most value.

Keywords: Trade in Value-added, TiVA, Global Value Chains, GVCs, Input-Output
JEL classification: F6; F13; F15, D57

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