Changes in domestic value added from exports: a structural decomposition approach

Participation in global value chains (GVCs) can help countries achieve productivity growth and increase the domestic value added (DVA) through the allocation of production processes. Therefore, identifying the factors within the GVC (value added productivity, export share, backward and forward linkage of them, and economic scale) that help countries reveals key considerations in economic policy-making for DVA production contribution. We developed a new structural decomposition analysis that decomposes time-series changes of export-related DVA into five effects and empirically analysed Japan's economy between 2000-2014. The results show that the domestic supply chain and share of intermediate export goods negatively impacted Japan's DVA. We found that Japan's exports triggered expansion in the downstream markets of emerging nations, like China, and high-technology industries are key to GVC growth.