The structural differences between the USA, Europe and Asia

There is much written these days about the big economies of America, 'Europe' and China, and the differences between them.

What is curious about this is that I haven't found anybody who has taken the time to actually visualise the differences.

This can be done a couple of ways and I will hopefully do both over coming weeks. The first would be to look at the differences in production co-efficients ( the ratios of inputs to make a $ of output). Alternatively, you can visualise the intermediate goods matrix. To do the latter I suggest the folowing.

1. I think you need to first develop a panel GDP set for both time series analysis and for international analyses so that the comparisons are actually on a dollar for dollar basis. It is most common to use national GDP as the denominator for comparisons but I think we should be doing better that than.
I made the argument here for panel GDP analysis http://econscapes.blogspot.com/2009/11/constant-prices-or-share-of-gdp-or.html . In a future blog I'll some international R&D analysis that I have developed to compare GDP with Panel GDP.


2. I have created an OECD GDP Panel dataset for fifteen countries starting in 1970.

3. So that done you can visualise the economies using the landscape chart format that I have explained previously in this blog. http://econscapes.blogspot.com/2009/10/econscapes.html
The data comes from the OECD input-output database for 2005 and the categories on both axis are simply those from the I-O inter-industry matrix (i.e. not the value  added of final demand sectors).

Click on the images below to enlargen.

1. The USA 2005.

What we see from this image is that the US economy's interdependencies are heavy weighted to the services sector.

The super tall peak is the interaction of the supplier industry 'Finance and insurance' and the demand industry of 'Finance and insurance' . In I-O economics it is most common that the intra-industry interactions are the largest.


2. Europe 2005.

We see that Europe (all the EU countries in the database) is also heavily weighted to the services sector. Now this image is not as accurate as it is constructed from the sum of domestic tables. It thus leaves out cross border but intra-european trade - which will favour manufacturing interactions. In future I'll post historical analysis of Europe that is more accurate as I have international input-output matrices for 1970, 1990 and 2000. For anything later than that will wait on the work of the European funded WIOD group.

3. Asia.

For the Asian countries (China, Japan, Korea, Indonesia and Taiwan) the same problem as applies to the Europe chart apply. It nevertheless emphasises the huge structural differences between the economies of America, Europe and Asia. Asia is heavily concentrated on manufacturing.

So, despite the inaccuracies, these charts provide a very interesting insight, though rough approximations of the relational structure of these three 'economies'.

The big discussion point out of these charts is that they reinforce the perception that services are based in the west and manufacturing in Asia.

April 2011 recommendations

Europe 2020 Flagship: An Industrial Policy for the Globalization Era
http://ec.europa.eu/enterprise/policies/industrial-competitiveness/industrial-policy/index_en.htm

European Commission: Entreprise and Industry

In this era of intensifying globalization, the concept of national sectors and industries is obsolete. Coordinated European policy responses are needed. Europe also needs an approach that looks at the whole value chain, from infrastructure and raw materials to after-sales service. Promoting the creation and growth of small and medium-sized enterprises has to be at the core of EU industrial policy. Moreover, the transition to a sustainable economy has to be seized as an opportunity to strengthen competitiveness. Only a European Industrial Policy targeting competitiveness and sustainability can muster the critical mass of change and coordination needed for success. This report outlines ten key actions to stimlate European industrial competitiveness.

Clusters, Convergence and Economic Performance

http://www.isc.hbs.edu/econ-clusters.htm
Mercedes Delgado, Michael E. Porter and Scott Stern

This paper evaluates the role of regional cluster composition in the economic performance of industries, clusters and regions. On the one hand, diminishing returns to specialization in a location can result in a convergence effect: the growth rate of an industry within a region may be declining in the level of activity of that industry. At the same time, positive spillovers across complementary economic activities provide an impetus for agglomeration: the growth rate of an industry within a region may be increasing in the size and “strength” (i.e., relative presence) of related economic sectors. Building on Porter's previous work the paper develops a systematic empirical framework to identify the role of regional clusters – groups of closely related and complementary industries operating within a particular region – in regional economic performance. It exploits newly available data from the US Cluster Mapping Project to disentangle the impact of convergence at the region-industry level from agglomeration within clusters. It finds that, after controlling for the impact of convergence at the narrowest unit of analysis, there is significant evidence for cluster-driven agglomeration. Industries participating in a strong cluster register higher employment growth as well as higher growth of wages, number of establishments, and patenting.

What goes into a single complex product

The last blog was all about what happens to a single pig.

If a single commdity ends up spread throughout the economy -what does it take to make a product.
What goes into a single product.

The web is full videos of people pulling things apart. I find this fascinating given that the paper I currently have in development is one on the relationship between the modularity of products and the global trade structure.

Here is one just one example: Taking apart an IPhone 4.

http://www.youtube.com/watch?v=U-O6IUSrTp8

Go find your own favourite.
Brian.

What happens to commodities

Have you ever wondered where the elements of a single commodity might end up.

This is simply amazing - it is the story of where a single pig ends up.

The economic connectome

While some scientists are prepared to entain the idea of mapping the connectome of brains, the idea is a great analogy of what we need to do at the level of the international economy.

What idustries are connected to what industries in what countries. Perhaps the World Input-Output database http://www.wiod.org/ will get us started but just as with neuroscience we need new tools and new concepts for tackling the task.

Enjoy the video.

Consider Canada's cities

I missed this when it was first announced as I was travelling. It is an interesting development that the cities of Canada have begun joining forces to attract FDI and encorage trade. Economic Development Agencies from Canada’s Large “C-11” Cities Agree to Promote International Trade and Investment with New Unified Brand - Innovation America

There is no mention yet that they will be a force in lobbying Canadian Governments regarding funding, but that has to be on the cards and soon. As a forthcoming event at the University of Toronto alludes to the current election has exactly set an agenda of development. see http://www.citiescentre.utoronto.ca/about/Events/14Apr2011.htm

A new year

The OECD ended 2010 with some new publications. One of significance here is there 2010 edition of the Sscience, Technology and Industry Outlook. http://www.oecd.org/document/36/0,3746,en_2649_34173_41546660_1_1_1_1,00.html

Another page worth looking at is their summary of a joint OECD / World bank seminar on business production newtorks.

http://www.oecd.org/document/24/0,3746,en_2649_34173_45847128_1_1_1_1,00.html