Abstract
With globalization and advance in information technology, firms tend to offshore their production activities, and international division of labor has become increasingly popular in recent years. Production process is often shared by multiple countries and final assembly is completed in labor abundant countries. Producers of parts and components (such as Taiwan) need to import materials and intermediate inputs, and their products are exported to assembling countries for further process, and then exported to the final destination. Fragmentation of production procedures forms the global supply chains and poses challenge to measuring country contribution to international trade. Current trade statistics is based on the transaction value of goods, making the assemblers of finished product the final exporters. However, the value-added attributable to these countries is often quite limited. In the presence of global value chains, bilateral trade relation measured in traditional way may not reflect the true country contribution to international trade and there has been a call for using value-added to measure international trade. This thesis sets out to trace changes in trade in value-added for Taiwanese manufacturing industries and evaluate the relative importance of possible determinants such as foreign direct investment ( FDI ) in China, investment in R&D, and price of crude oil. The empirical analysis uses the Trade in Value-added ( TiVA ) statistics published by the Organization for Economic Cooperation and Development ( OECD ) in years 1995, 2000, 2005, 2008 and 2009. This study have two main findings. First, the share of domestic value-added in gross exports for Taiwanese manufacturing industries has declined over time, and South Korea and China have similar experience. Second, both gross exports and domestic value-added embodied in foreign final domestic demand are negatively affected by FDI con the other hand, is negatively affected by the soaring price of crude oil and positively influenced by FDI in China.