The Similarity of Global Value Chains: a Network-Based Measure

Zhu, Zhen and Morrison, Greg and Puliga, Michelangelo and Chessa, Alessandro and Riccaboni, Massimo The Similarity of Global Value Chains: a Network-Based Measure. EIC working paper series #9/2015 IMT Institute for Advanced Studies Lucca ISSN 2279-6894. (Submitted)

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Abstract

International trade has been increasingly organized in the form of global value chains (GVCs) where different stages of production are located in dfferent countries. This recent phenomenon has substantial consequences for both trade policy design at the national or regional level and business decision making at the form level. In this paper, we provide a new method for comparing GVCs across countries and over time. First, we use the World Input-Output Database (WIOD) to construct both the upstream and downstream global value networks, where the nodes are individual sectors in dfferent countries and the links are the value-added contribution relationships. Second, we introduce a network-based measure of node similarity to compare the GVCs between any pair of countries for each sector and each year available in the WIOD. Our networkbased similarity is a better measure for node comparison than the existing ones because it takes into account all the direct and indirect relationships between country-sector pairs, is applicable to both directed and weighted networks with self-loops, and takes into account externally defined node attributes. As a result, our measure of similarity reveals the most intensive interactions among the GVCs across countries and over time. From 1995 to 2011, the average similarity between sectors and countries have clear increasing trends, which are temporarily interrupted by the recent economic crisis. This measure of the similarity of GVCs provides quantitative answers to important questions about dependency, sustainability, risk, and competition in the global production system.

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