Measuring Localization in the Age of Economic Globalization

In a highly integrated global economy, the strength of domestic linkages shows a country's ability to gain from global value chain participation. We adopt agglomeration to measure domestic linkages in a global setting. Using ADB's multiregional input-output tables from 2007 to 2020, this paper estimates a backward and forward agglomeration index, which measure the extent to which value added is sourced from and absorbed by domestic sectors, respectively. The indexes show a positive correlation with reshoring indexes. Moreover, high agglomeration in services sectors show a positive relationship with gross value added in sectors connected to GVCs, such as manufacturing