As a country gets deeper into global supply chains, does it capture more of the value or less?
Domestic Value Added in Exports: Theory and Firm Evidence from China
Hiau Looi Kee, Heiwai Tang (2016) · American Economic Review 106(6)
Article ↗ · Replication data ↗ (openICPSR)
The archive requires an account we do not hold, so the files were not opened. What follows rests on the published abstract and on this platform's own observations.
What the authors found
The expectation is that joining supply chains means assembling other people's components, so domestic content falls. Kee and Tang show China went the other way. Using firm and customs transaction data, they find processing exporters substituted domestic materials for imported ones, raising China's domestic content in exports from 65 to 70 per cent between 2000 and 2007. Trade and investment liberalisation caused it: deeper integration made a wider variety of domestic inputs available more cheaply.
What our data adds
The comparison our data allows is with Europe today. Across 27 EU reporters in 2024, domestic value added is 63.4 per cent of gross exports — below the 70 per cent China had reached by 2007 on the authors' firm-level measure. Individual European economies straddle it: Germany at 73.8 per cent is above, Ireland at 52.2 and Belgium at 54.6 well below. Whatever else it settles, this makes the point that a rising domestic-content ratio is not a developing-country phenomenon working itself out, and a falling one is not a sign of failure.
| Figure | Value | Indicator |
|---|---|---|
| China domestic content in exports, 2007 (Kee & Tang) | 70% | FIGARO.DVA_EXP |
| EU27 domestic value added share, 2024 (this database) | 63.4% | FIGARO.DVA_EXP |
| Germany | 73.8% | FIGARO.DVA_EXP |
Every figure here is computed from observations in this database and can be charted, downloaded or queried.
What this cannot show
These two numbers measure different things and should not be subtracted. The authors compute domestic content from firm-level customs transactions for China; ours comes from country-level input-output accounts for the EU, on a different definition, seventeen years later. FIGARO does not carry China as a reporting economy, so the direct comparison the note wants is not available in this database at all.
The data behind it
Related notes
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