Measuring the degree of integration into the global production network by the decomposition of gross output and imports: A cross-country study, 1995-2015 1

Abstract

Import content of exports (ICE), suggested in mid-2000s, has been frequently used in empirical studies to measure the degree of integration into the global production network. Kim (2020) suggested an alternative indicator based on the decomposition of aggregate gross output and total imports into the contributions of individual final demand terms, using input-output analysis. His indicator reflects the strategy with which a country manages the domestic production base and utilizes the global production network simultaneously, while ICE only considers the latter. For this reason, Kim (2020) claimed that the indicator is a more comprehensive indicator than ICE. The purpose of this paper is to apply the method suggested by Kim (2020) to six major exporting countries, China, Germany, Japan, Korea, United Kingdom and United States, for 1995-2015 using OECD’s Input-Output tables. The results show that these countries’ overall degree of integration into the global production network increased during the period. Korea and China exhibited the strongest degree of integration into the global production network.