Wen Chen, Bart Los, Marcel Timmer · 2021
In Corrado, C.,J. Miranda, J. Haskel and D. Sichel (eds.): Measuring and Accounting for Innovation in the Twenty-First Century, Chicago: University of Chicago Press and National Bureau of Economic Research.

Factor incomes in global value chains: The role of intangibles.

Recent studies document a decline in the share of labour and a simultaneous increase in the share of residual (‘factorless’) income in national GDP. We argue the need for study of factor incomes in cross-border production to complement country studies. We define a GVC production function that tracks the value added in each stage of production in any country-industry. We define a new residual as the difference between the value of the final good and the payments to all tangibles (capital and labour) in any stage. We focus on GVCs of manufactured goods and find the residual to be large. We interpret it as income for intangibles that are (mostly) not covered in current national accounts statistics. We document decreasing labour and increasing capital income shares over the period 2000-14. This is mainly due to increasing income for intangible assets, in particular in GVCs of durable goods. We provide evidence that suggests that the 2000s should be seen as an exceptional period in the global economy during which multinational firms benefitted from reduced labour costs through offshoring, while capitalising on existing firm-specific intangibles, such as brand names, at little marginal cost.

Contributors from our Network

Bart Los

Bart Los
University of Groningen

Bart Los is professor of technological progress and structural change at the Groningen Growth and Development Centre at the University of Groningen, the Netherlands, and is currently vice-president of the international input-output association. He has been joint leader of the World Input-Output Database project (www.wiod.org), and has recently investigated the distribution of factor incomes in GVCs, as well as the role of GVCs in transmitting trade shocks, such as Brexit. He holds a PhD from the University of Twente, the Netherlands.

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Marcel Timmer

Marcel Timmer
University of Groningen

Marcel Timmer is Deputy-Director of the CPB Netherlands Bureau for of Economic Policy Analysis and professor of economic growth and development at the Groningen Growth and Development Centre at the University of Groningen, the Netherlands. He has recently led the research program ‘Modelling Global Value Chains: a new framework to study trade, jobs and income inequality in an interdependent world’, which built on his contributions through the World Input-Output Database project (www.wiod.org). He holds a PhD from the Eindhoven University of Technology, the Netherlands.

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