What is complex globalization?

What is complex globalization?

Globalization or globalization is an umbrella term for a complex series of economic, social, technological, cultural and political changes seen as increasing interdependence. Moreover, integration and interaction among people and companies in disparate locations.

Most countries are accelerating the integration of manufacturing and services today.

This paper attempts to calculate the technical complexity of manufacturing exports of 40 representative countries from the perspective of value-added trade based on the OECD-TIVA database. Panel data is used to investigate the impact of producer services import on the technical complexity of manufacturing value-added exports of all sample countries, which explores the commonality and difference among countries. It is found that the overall producer services import has a positive impact on the technical complexity of manufacturing value-added exports in both developed and developing countries. 

This influence on the technical complexity of manufacturing value-added export in developing countries is often greater than that in developed countries. It is found that the import of financial services and transportation services has a greater impact on the sample countries and the impact degree of different producer service imports is different from the perspective of imported producer service input. 

The production processes of GVCs are increasingly decentralized and fragmented. It brings about intra-product trade, which results in that not all the technical content contained in a country’s export products is contributed by the country itself, the technical contribution from foreign intermediate inputs included. 

A large part of the value-added of manufactured exports in developed countries comes from the service sector. Yvonne Wolfmayr (2012) [1] conducted an empirical analysis on the manufacturing industry of some countries in the European Union. The results show that a country’s domestic service inputs have no positive impact on its exports of manufactured goods. 

But the import of service inputs has a significant positive impact on the export of a country’s manufacturing industry. Swenson et al. (2012) [2] conducted an in-depth study on the relationship between the import of intermediate goods and export of a country and found that the import of intermediate goods of heterogeneous enterprises has a significant promoting effect on export, which comes from high-quality and high-tech intermediate inputs. Domestic scholars have also done in-depth research and investigated the relationship between producer service import and technological progress of China’s manufacturing industry through the dynamic panel GMM model, and calculated the input of producer service of China’s manufacturing industry segment by using FH and other indexes. 

The results show that the import of producer services promotes the technological progress of the manufacturing industry. Hu Liza and Luo Liying (2017) (4) pointed out that the increase of producer service imports can significantly improve the quality of export products in the manufacturing industry, and different producer services have different effects on the quality improvement of export products.

Above that, domestic and abroad scholars have discussed the relationship between the import of producer services and the technical complexity of manufacturing exports from perspectives. In fact, a country imports producer services that some of which become the final consumer goods of the importing country. But some of which are put into the manufacturing industry as intermediate goods.

So, how much of a role does a country’s import of foreign producer services into the manufacturing industry as an intermediate product play in improving the quality of its exports of manufactured goods? On the basis of the research of many scholars, this paper attempts to use the OECD-TIVA input-output table database to select the data of producer service imports into the manufacturing industry of representative countries from 1995 to 2016, which make the conclusion more reliable. 

At present, the world’s major countries are increasingly concerned about the status of their manufacturing industry in the global value chain. Trade in value-added can measure and reflect the characteristics of global Trade. This paper tries to measure a country’s manufacturing export technology level from the perspective of value-added trade. We replace the traditional export value with the domestic value added in exports, and replace the RCA based on gross trade with the RCA based on domestic value-added trade to eliminate the foreign value added in exports, which reduces the wrong estimation of the real technology content of a country’s manufacturing exports by traditional export technology complexity index under the global value chain division system (s).

In this paper, the technical complexity index proposed by Hausmann et al. (2005) and the method of Liao Zefang and Li Ting (2017) [6] are used for reference to build a country’s export technological complexity based on added value. Constructing value-added export technology complexity index: 

VESI, = 

(xvi / X,İN PRODIGY, 

In Equation (1), VESII is the value-added export technical complexity of the industry (all industries, namely the country), which reflects the technical structure of the export industry (country).C represents value-added export countries or regions; i for specific industry; xvi refers to the domestic value added in exports of industry i in Country c; Xv represents the domestic value added in exports of all industries in Country C; xvi/Xv represents the proportion of the domestic value added in the exports of industry i in Country C to the domestic value added in the exports of all industries. We use NP RODYi to represent the technical complexity of value-added export of industry I. The specific expression is as follows: 

NPRODY, = { {[(x/X)/(«,,/X,))”} 

In Formula (2), yc represents the per capita GDP of Country C, and represents the country’s dominant comparative advantage in industry I.X(XVI/XV) represents the proportion of the domestic value added in the 

No. 4 ( General, No. 318) Journal of Industrial Technological Economics 

Apr. 2020 

exports of industry I in all countries in the world. 

The WTO-OECD launched its value-added database in 2013.In this paper, the top 40 countries in value-added trade were collected as the object of study. The value-added exports accounts for more than 91 percent of the global total, which is representative to a certain extent. We collected data from these sample countries from 1995 to 2016, and calculated the technical complexity of manufacturing value-added exports for each country. The ranking of value-added export technology complexity of representative years 2 is listed here, as shown in Table 1 due to the word limit. Looking at the data for 2005, 2011 and 2016, the top 15 countries are almost all high-income countries. Finland, Ireland, Switzerland and Japan have been hovering in the top four.

Developing and emerging economies are all below the 15th. This phenomenon shows that the manufacturing products of high-income countries generally have higher export quality, and the export products are rich in the value-added created at home. They are mainly high- tech or medium – high- tech products. In contrast, manufactured exports from developing and emerging economies are of modest quality. The domestic value-added content of these countries’ exports is not high, and the technological content of their products is medium or even low. It is worth noting that China ranked 36th in the technical complexity of its manufacturing value-added exports in 2005, which is rising to 31st in 2011 and 21st in 2016. The quality of China’s manufactured exports has improved, especially in 2016. This may have a relation with China’s “Made in China 2025” strategy. 

Countries in the world differ greatly in geographical location, natural environment, infrastructure, economic system, per capita GDP, residents’ education level and trade openness. So, what causes the high and low technical complexity of manufacturing value-added exports? Countries make the import of foreign producer services as a favorable “additive” for their own manufacturing production and export. What is the promotion effect of it on the technical level of manufacturing export? These are the questions to explore in this paper. 

This paper examines the impact and degree of imported producer service intermediate input on the technical complexity of value-added export of a country’s manufacturing industry from the transnational level. The basic hypothesis is that the import of producer services as an intermediate input will have a positive impact on the improvement of the technical complexity of a country’s manufacturing value-added export. The higher the level of producer service import, the greater the effect on the technical complexity of value-added export of manufacturing industry in the importing country. 

Model setting and variable selection 

By constructing the model, this paper selects representative countries as samples for empirical research. The economic development level (per capita GDP), foreign direct investment (FDI), human capital accumulation (EDU), research and development activities (RD) and market scale of each country were selected as the control variables to construct the following model: 

Invesi; = 4, +a, Inps:, + Ingdp.: + Infdi, + Inedu:, + Inrd:, + Inscale: +u; + €; 

In Equation (3), i represents the country, t represents the year, and vesi represents the technical complexity of value-added export of manufacturing industry at the national level of each country. PSit represents the import volume of producers of various countries;GDPit stands for GDP per capita within a country; FDlit stands for foreign direct investment by country; Eduit stands for human capital accumulation, which is represented by the enrollment rate of university education.

RDit stands for research and development activity, which is measured by countries’ R&D spending as a share of GDP; scale represents the market size of each country, measured by the total population of each country. Ui is the intercept term representing the heterogeneity of the individual, and Eit represents the random perturbation term that changes with the individual and time. 

In addition, the import of producer services is from the OECD input-output Tables database. The Data of GDPit per capita, FRUIT of foreign direct investment in each country, Eduit of human capital accumulation, RDit of research and development activities and scaleit of market are from The database of The World Bank Open Data. Moreover, in order to reduce multicollinearity and heteroscedasticity, natural logarithm of the above control variables was taken before linear regression. 

2.2 Empirical test and result analysis 

2.2.1 Estimated results for all countries 

This paper uses cross-country panel data to explore the impact of imported producer service intermediate inputs on the technical complexity of value-added exports of manufacturing industries in major countries. From the regression results of the fixed-effect model (Table 2), the following conclusions can be drawn: 

Imported producer service intermediate input has a significant positive impact on the technical complexity of manufacturing value-added export in all sample countries, and the average increased elasticity is 0. 0729%. This indicates that the import of producer services has a promoting effect on the technical level of manufacturing export. 

Per capita GDP, human capital accumulation and R&D activities in each country have a significant positive effect on the technical complexity of manufacturing value-added export. Their improvement was 0.7934%, 0. 1766% and 0. 1010% respectively. Therefore, the country should pay attention to the cultivation of talents, encourage scientific research activities and actively carry out economic construction to promote development, which improves the export technology level of the manufacturing industry. 

There is a negative correlation between foreign direct investment and technical complexity of manufacturing value-added export. 

This is not in line with theoretical expectations. Producer service import and foreign direct investment are ways to upgrade the export technology level of a country’s manufacturing industry, and they have a substitution relationship. This shows that foreign investment in some countries needs to be guided in a way that is more conducive to the development of their own manufacturing industries. 

(4) There is a negative correlation between market size and technical complexity of manufacturing value-added export. This, too, is inconsistent with theoretical expectations. In this paper, population size is used to measure the variable of market size, and there are two reasons for this result: (1) population size cannot truly reflect the actual market potential and possible economies of scale of a country;(2) Under the background of active participation of countries in GVCs, the significance of population size to countries (or regions) at different stages of economic development is different. 

This paper selects representative countries as sample objects for empirical research to build a model. There are 39 countries in the sample, of which 26 are high-income countries and the remaining 13 are high- and middle-income countries, but these 13 countries are basically emerging economies. In this paper, the sample of 39 countries is divided into two groups: one group is high-income countries (developed countries), and the other group is developing countries, including emerging economies .

The regression coefficients of producer services imports in developed and developing and emerging economies are significantly positive. It shows that the import of producer service intermediate input has a positive impact on the improvement of technical complexity of manufacturing value-added export in all sample countries. For every 1% increase in producer import, the technical complexity of manufacturing value-added export in developed countries increases by 0.0347%, while that in developing countries and emerging economies increases by 0. 0767%. It can be seen that the effect of producer services import on the technical complexity of manufacturing value-added export in developed countries is less than that in developing countries.  

From the perspective of developed countries, the elasticity of per capita GDP, human capital EDU and domestic R&D activity RD in Model (2) are all positive. The increase elasticity of per capita GDP and human capital EDU is 1.1447% and 0.3286% respectively, and it is significant at the level of 1%, which indicates that the level of economic development and human capital have a positive promoting effect on the technical complexity of manufacturing value-added export in developed countries. The improvement elasticity of RD of R&D activity is 0. 0370, but it is not significant. 

From the perspective of developing countries, the promotion elasticity of per capita GDP and domestic R&D activity RD in Model (4) are both positive. The increased elasticity of GDP per capita and RD of domestic R&D activities are 0. 7450% and 0. 1750% respectively, and are significant at the 1% level, which indicates that the level of economic development and domestic R&D activities have a positive promoting effect on the technical complexity of manufacturing value-added export in developing countries and emerging countries. The elasticity of human capital EDU was -0.0277%, but it was not significant. This suggests that developing and emerging economies need to do more to cultivate talent. 

The level of economic development has a positive impact on the two kinds of countries. The elasticity of the index to the technical complexity of manufacturing value-added export of developed countries is obviously higher than that of developing countries.

The elasticity of human capital enhancement in developed countries is 0.3286%, and that in developing and emerging economies is -0.0277%. Therefore, human capital in developed countries plays a greater role in promoting human capital, which may be related to the large number of people receiving higher education in developed countries, good ability to digest and absorb new technologies, and relatively high efficiency of resource allocation. The elasticity of RD of R&D activities to increase the technical complexity of manufacturing value-added export in developed countries is lower than that in developing countries. Therefore, domestic R&D activities play a better role in promoting the upgrading of manufacturing technology levels in developing countries than in developed countries. 

The elasticity of foreign direct investment to the technical complexity of manufacturing value-added export is negative in both categories of countries. The lifting elasticity of FDI for developed countries is -0.0253%, and for developing countries and emerging economies is -0.0369%. It shows that foreign direct investment is not conducive to the improvement of technical complexity of manufacturing value-added export.

The possible reason for this phenomenon is that foreign direct investment and producer service import are both ways to promote the upgrading of the manufacturing technology level of the importing country, and they can replace each other to a certain extent. Countries should make more practical policies when attracting foreign investment and services from producers. The elasticity of market size to the technical complexity of manufacturing value-added export of the two categories of countries is also negative. The elasticity of market size to developed countries is -3.0083%, and that of developing countries and emerging economies is -0.9021%, which indicates that market size is not conducive to the increase of technical complexity of value-added export of manufacturing industries in various countries. 

Model setting and data selection 

The effect of different technology intensity of producer service import on the technical complexity of value-added export of manufacturing industry may be quite different due to the difference of each producer service. Therefore, this paper makes an empirical analysis of the effect of subsector producer services import on the technological complexity of value-added exports of manufacturing. 

The explained variable is the technical complexity of manufacturing value-added exports of each country, and the core explanatory variable is the import amount of producer services used by each industry with different technology intensity of input manufacturing in the model constructed. 

Invesi, = 2, +a, In(trans)+a, In( pote, )+ az In( fi – nan,)+a,In(hause;.)+a;In(reale, )+ a. In(compu, ) + a, (resea,)+ Byx jie +u, +;, 

SE 

The control variables are as follows: GDP IT is the per capita GDP of each country; FDIIT refers to foreign direct investment of each country; eduit stands for human capital accumulation, which is represented by the enrollment rate of university education. edit stands for R&D activity, expressed as a share of each country’s R&D spending in GDP; scaleit represents the market size of each country, measured by the total population of each country. data on imports of producer services come from the OECD database, and data on GDP per capita, foreign direct investment by country, human capital, research and development, and market size come from the World Bank database. 

Empirical test and result analysis 

In order to investigate the influence of foreign producer services with different characteristics on the technical complexity of value-added export of manufacturing industry in the importing country, this paper adopts the fixed effect of panel data. The import volume of 7 types of producer services as the core explanatory variables were successively included into the econometric equation for regression. The degree of influence is examined in this way. 

This paper finds that :(1) From the perspective of the significance of the impact. The seven types of service trade. As the core explanatory variable have different effects on the technical complexity of manufacturing value-added export. The effect of financial services on the technical complexity of value-added export of the manufacturing industry of the importing country is positive, and the significance level is 1%. Furthermore, the effect of transportation service on the technical complexity of value-added export of the manufacturing industry of the importing country is positive, and the significance level is 5%. The effect of R&D and other business services on the technical complexity of export of value-added manufacturing of the importing country is positive, and the significance level is 5%.

In addition, the effect of real estate service import is positive, but not significant. It may be that the real estate service itself has a low technical content and its acting mechanism as intermediate input is not significant. The influence of computer service import is positive and not significant. But the computer service contains rich knowledge and information, its technology content is high, and the result is not consistent with our expectations. The influence effect of import of leasing service and post and telecommunications service is small negative value, neither of which is significant. 

(2) From the perspective of impact degree, this paper makes judgment and comparison through the estimated value of producer service import sub-item. The estimated coefficient of financial service is the largest and positive, and the improvement elasticity is 0.0779% among the seven types of producer service imports. Furthermore, the estimated coefficient of transportation service is large and positive, and the improvement elasticity is 0.0657%. Thus, the estimated coefficient of R & D and other business services is positive, and the improvement elasticity is 0.0258%

The estimated coefficient of real estate service is positive, and the improvement elasticity is 0. 0134%. Furthermore, the estimated coefficient of computer service remains positive and the lifting elasticity is 0.0020%. In addition, the estimated coefficients for rental services and postal and telecommunications services were negative. Moreover, with the elasticity of improvement of -0.0237% and -0.0054%, respectively.

As intermediate inputs of manufacturing producers, they contain different technical content and different mechanisms of action due to the different characteristics of producer service imports. Therefore, their influence on manufacturing value-added export technology level is also very different. This paper assumes the import of producer services with higher technical content. The intermediate input will have a more significant impact on the value-added export technology level of the manufacturing industry of the importing country. However, the empirical results do not fully support this hypothesis, and the reasons may be related to the quantity and use of producer service imports. 

(3) From the perspective of other control variables, the effects of per capita GDP. In addition, human capital accumulation EDU and R&D activity RD are positive and significant;The influence of FDI and market scale is negative and significant 

Conclusions and policy recommendations 

From the perspective of value-added export trade, this paper examines whether the import of intermediate inputs of producer services in each country’s manufacturing industry has an impact on the technical complexity of value-added export of a country’s manufacturing industry. The empirical results show that the import of producer services can improve the national manufacturing industry. 

Value-added exports are technically-complex, and this phenomenon is widespread in the world. The empirical results show that the effect of producer services import on the technical complexity of manufacturing value-added exports in developed countries is less than that in developing countries. 

The effect of import of producer services on the technical complexity of value-added exports of manufacturing industries is different, and the added value of import of producer services of different sectors on the manufacturing industries of different types of countries is different. 

There are also differences in the promotion effect of technical complexity. The empirical results show that the import of financial services and transportation services has a greater impact on the two sample countries. 

Policy recommendations 

The conclusions above not only have guiding significance for the policies adopted by OECD countries. However, also have important reference value for our country with rapid economic development.

(1) The government will increase its support for the import of producer services. Our government should improve the openness of service trade and pay attention to the openness of producer services. This approach can attract more and better quality foreign producers to invest in the production. And operation activities of China’s manufacturing industry. And play its many economic effects is an important way to promote the technical level of manufacturing export 

(2) Pay attention to the input of material capital and other resources. In order to improve the level of export technology in the manufacturing industry, we should not only pay attention to the input of human capital and research and development activities, but also increase the input of material capital. At the same time, various supporting resources of the industry must be timely. Infrastructure construction is an important condition to promote the import of producer services. The construction of Internet facilities platform, logistics information platform and information transmission platform is conducive to the development of producer services. 

(3) Gradually lowering trade barriers and market access thresholds. At present, the market access restrictions of some producer services in China are relatively strict. And the industry openness is low. Their performance is that the proportion of imported services in the intermediate input of manufacturing industry is low, which is not conducive to making up for the shortage of domestic producers’ service supply. Producer services with better import quality provide sufficient advanced elements. For the manufacturing industry to improve the technical level of export. 

Note: 

There is no unified translation of “Trade in value-added” in China at present. The author believes that “value-added trade” is relatively accurate, and we can simply translate it into “value-added trade”. 

The representative years we selected include 2005, 2011 and 2016 due to the number of words, 

3 The World Bank database has classified South Korea as a high-income country. 

4 According to the world bank database, high-income countries include: the United States, Germany, Japan, Italy, France, South Korea, the commonwealth, Canada, Spain, Switzerland, the Netherlands, Sweden, Poland, Belgium, Austria, Singapore, Australia, the Czech republic, Ireland, Saudi Arabia, Finland, Chile, Denmark, Norway, Hungary and Israel; Middle – and high-income countries include: China, Russia, Mexico, Brazil, Thailand, Malaysia, Turkey, Argentina, South Africa, Romania; Low – and middle-income countries include India, Indonesia and Vietnam. 

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Lee Spelman

References 

[1] [J]. 

Yvonne Wolfmayr, Export Performance and Increased Services Con – tent in Manufacturing National Institute Economic Review, 2012, 4 (220): 36 ~ 51. 

[2] Swenson, Deborah L. The Connection Between Imported Interme-diate Inputs and Exports: Evidence from Chinese Firms [J]. Journal of International Economics, 2012, (101): 386 ~ 101. 

[3]Chen Qifei, Liu Zhibiao. Import service trade, technology spillover and total factor productivity– Empirical analysis based on bilateral service trade data of 47 countries [J]. World Economic Literature, 2015, (5):1– 21. 

[4] Hu Liza, Luo Liying. Effects of Producer Service Imports on Export Quality of China’s Manufacturing Industry [D]. Changsha: Hunan University 2017. 

[5] Qi Junyan, Lv Jianhui. Impact of Imported Intermediates on Net Technical Complexity of China’s Exports: From the perspective of Intermediates with Different Technical Levels [J]. economics of finance and trade, 2016, (2):114 ~ 126. 

[6] Liao Zefang, Li Ting. Foreign trade structure, technological complexity and China’s value-added export competitiveness [J]. contemporary economic science, 2017, (3): 48 – 58.

What is complex globalization?