Gross output flows in global value chains

In recent years, as global value chains (GVCs) are more exposed to frequent and severe disruptions, better tools are required to assess the risks associated with participation in GVCs. Compared with Trade in Value-Added (TiVA) indicators, gross output indicators capture how systemic shocks, such as natural disasters or geopolitical events, typically disrupt the entire (i.e. accumulated) shipment value of goods, not just the value added in the disrupted country. Consequently, intermediate inputs sourced from, or sent to, a particular partner economy may be counted multiple times as goods or services repeatedly cross borders.

Like TiVA indicators, gross output indicators account for:

• Direct trade reliance — for example, inputs sent directly from country A to country B.
• Indirect or “hidden” trade reliance — for example, inputs sent from country A to country B via country C.

Gross output indicators are based on the OECD’s Inter-Country Input-Output (ICIO) tables, available for 81 economies (including rest of the world), 50 economic activities and for the time-period 1995-2022.

The FIR and FMR are import and export side measures, respectively. They can be interpreted as the share of total domestic output exposed to foreign disruptions in GVCs — upstream disruptions for FIR and downstream disruptions for FMR. Overall, both FIR and FMR account for (1) the size of direct and indirect exposure to a partner in the value chain; and (2) the distance to this partner in the value chain, i.e. the length of the value chain.

FPEM and FPEX are import and export side measures, respectively, which decompose a country’s exposure to inputs sourced from/sent to foreign trade partners through 1) the “face value” exposure stemming from direct trade links and 2) the “hidden” exposure caused by indirect trade links. Together, the two components  capture a country’s total exposure through both direct and indirect trade links, otherwise known as the “look through” indicators.

Additionally, the indicators are normalised (by total inputs – domestic and foreign – on the sourcing side, and total sales – domestic and foreign – on the selling side), ensuring that they range between 0% and 100% and provide an assessment of the size of direct and indirect gross output exposures.

• Baldwin, R. and R. Freeman (2022), “Risks and Global Supply Chains: What We Know and What We Need to Know”, Annual Review of Economics, Vol. 14/1, pp. 153-180.
• Baldwin, R., R. Freeman and A. Theodorakopoulos (2022), “Horses for Courses: Measuring Foreign Supply Chain Exposure”, NBER Working Paper No. 30525. 
• Baldwin, R., R. Freeman and A. Theodorakopoulos (2023), “Hidden Exposure: Measuring US Supply Chain Reliance”, Brookings Papers on Economic Activity.