Working Paper
Employment effects of joining global production networks

Does domestic value added matter?

Is the emphasis placed in trade and industry policy-making in developing countries on the share of domestic value-added (‘value-added ratio’) in exports consistent with the objective of achieving economic development through an export-oriented development strategy?

This paper examines the rationale behind this policy emphasis, first by revisiting the conventional case for using the value-added ratio as a policy guide, and then by undertaking an input-output (I-O) analysis of manufacturing industry in Thailand with an emphasis on employment generation and equity. The analysis is based on a balanced panel data set covering 74 manufacturing sectors from 1990 to 2015.

The findings do not support the widely shared view among policy makers that industries with high value-added ratios have more potential to create export-induced employment. The policy implication of the results is that in this era of economic globalization, national industrial policy needs to be guided by the market potential of products rather than value-added ratios.