Measuring trade in value added: How valid is the proportionality assumption?
![](https://acde.crawford.anu.edu.au/sites/default/files/styles/anu_narrow_200_200/public/publication/images/acde_crawford_anu_edu_au/2019-05/td_working_paper_image_1_1.jpg?itok=ItaAZjDn)
The validity of the ‘proportionality assumption’ made in estimating value added in exports using aggregate input-output tables is tested using separately compiled domestic- and imported-input matrices for Indonesia, Thailand, Malaysia, Taiwan, and Australia. The results show that the use of the proportionality assumption results in overestimation of value-added exports, and that the magnitude of the bias becomes amplified when the export composition of a country shifts from primary products to manufactured goods through integration into global production networks.
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