Bilateral Equivalence between Trade in Value Added and Value Added Content of Trade

This paper demonstrates that the bilateral equivalence between trade in value added (TiVA) and value added content of trade. TiVA, based on value added exports, which is proposed by Johnson-Noguera and OECD-WTO, measures origin country’s value added exports induced by each destination country’s final demand, excluding intermediates, for the world. Value added content of trade or “value added in trade (VAiT),” which is proposed by Trefler and followed by Stehrer, measures value added induced by appropriately arranged gross trade, including intermediates. At a glance, these two measures may look quite different. This paper shows that in the world with two countries and many countries these two measures of TiVA and value added content of trade are bilaterally equivalent.