single market integration and competitiveness

SINGLE MARKET INTEGRATION AND COMPETITIVENESS A VALUE CHAIN PERSPECTIVE JRC-B5, September 2018

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Research context

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Research questions

We would expect the Single Market to improve resource allocation and bring efficiency gains through higher competition within the EU # Has the Single Market improved internal and external competitiveness of the EU economy? # Are there significant differences across economic activities?

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Recent related work -The role of the EU in global value chains, JRC presentation, April 2017

-The role of the EU in global manufacturing value chains, JRC presentation, July 2017

-Internal market recent developments. A value chain perspective, JRC presentation, June 2018

-EU losing share in global manufacturing value chains, JRC Science for Policy Brief, June 2018

-The Direct and Indirect Effects of Product Market Regulations in the Retail Trade Sector, Theoretical Aspects and an Exploratory Data Analysis, JRC Technical Report, forthcoming in 2018

-Drivers and Obstacles to Competitiveness in the EU: The Role of Value Chains and the Single Market, WIFO (lead), May 2017

-The Single Market and Industry: a value chain perspective on integration and competitiveness, High Level Group on Competitiveness Exploratory Analysis, April 2018

-Single Market integration and competitiveness -a look at value chains and sectors-, Competitiveness Council, May 2018

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Measuring Single Market integration

Sectoral characterization and dynamics

Link with competitiveness

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The deployment of the Single Market implies eliminating barriers for the free movement of products and factors between member states, hence increasing the regional share in total economic transactions in the EU

General definition

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A value chain is the succession of all economic activities needed to elaborate and bring eventually a product to final demand Economic transactions can be identified with the generation of value added (i.e. income to remunerate production factors) in each of these activities

The value chain perspective

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We consider two broad geographical areas: the EU and the Rest-of-World (RoW)

We split the value chain of a product into five stages: three-tier input supply structure, final production and final demand

Each of these stages can take place either in the EU or the RoW

We differentiate transactions between successive stages according to location of economic agents: domestic, regional and extra-regional

We define a 'value added route' as one geographical combination (broad areas + type of transaction) of the five stages in a value chain

Our value chain framework

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Rest-of-World

EU

Broad geographical areas

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Final Production

Downstream Input

Supplier

Midstream Input

Supplier

Domestic Regional

Extra-regional

Domestic Regional

Extra-regional

Domestic Regional

Extra-regional

Final Demand

Upstream Input

Suppliers

Domestic Regional

Extra-regional

Type of transaction

Stage of value chain

The five stages in the value chain

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Types of transactions: an example

Domestic

Regional

Extra-regional

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… … … … … … …

Final Production

Downstream Input

Suppliers

Midstream Input

Suppliers

Final Demand

Upstream Input

Suppliers

A full value chain: an example

EU countries

RoW countries

The full value chain serving final domestic demand in the EU

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Value added routes: an example

Final Production

Downstream Input

Suppliers

Midstream Input

Suppliers

Final Demand

Upstream Input

Suppliers

… … … … …

The full value chain serving final domestic demand in the EU

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1/ By type of transaction – only the value added in regional bilateral trade within the EU

2/ By type of value chain – sum of value added in the EU generated in a 'value added route' containing at least one EU regional transaction (a looser definition than in WIFO, 2017)

The unobserved true 'regionality' would lie between both values, being 1/ a minimum and 2/ a maximum

Alternative approaches to measure the regional share

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An example with simplified structure Final

Production Input

Suppliers Final

Demand

10

10 5

5

5

5

€ value added

1/ By type of transaction: Domestic = 20 Regional = 20 2/ By type of value chain: Value added in more downstream stages is proportionally distributed to each value added route

Domestic = 10 Regional = 30

Domestic

Domestic

Regional

Domestic

Regional

Regional

Value added routes:

Regional

Regional

Regional

Domestic

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1/ By product of final demand - value added generated throughout all economic activities serving final demand of products of a particular industry

2/ By activity of value added - value added of a particular industry generated serving final demand of all economic activities (as in WIFO, 2017)

Alternative accounting criteria for value added

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An example with simplified structure

Final Production

Downstream Input

Suppliers

Final Demand

€ value added

1/ By product of final demand: Car = 25 Engine = 0 Finance = 10 2/ By activity of value added: Car = 10 Engine = 5 Finance = 20

Upstream Input

Suppliers

5 5

5

10

10

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Policy importance of accounting criteria: an example

By product of final demand By activity of value added

Sectoral composition of EU value added in exports (2014)

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Characterization

We compute the regional share as the ratio of value added associated with intra-EU transactions to total EU value added, using all combinations of alternative approaches and accounting criteria

1/ We show results at aggregate and sectoral level over the 2000-2014 period

2/ We compare the regional share across economic activities for 2014 and the change over the 2000-2014 period

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1/ Aggregate features

Around 35% of EU value added is linked to regional participation in value chains, although less than 10% corresponds to bilateral regional transactions (i.e. intra-EU trade)

The degree of 'regionality' has increased on aggregate levels and across all broad sectors between 2000 and 2014

The regional share in manufacturing is substantially higher than in other economic activities, particularly for value added directly generated by intra-EU trade of manufactures

Aggregate tradable services (trade, transport, finance and business services) show nevertheless the largest relative increase during the sample period

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Aggregates by type of transaction


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Aggregates by type of value chain


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2a/ Takeaways for economic activities

High-tech manufacturing shows for 2014 the highest regional share across all definitions (between 30% in intra-EU trade and 60% in broader regional value chains), followed by other manufactures and primary activities

Among services, the degree of 'regionality' is higher overall for wholesale trade, air transport and warehousing, as well for participation in value chains of business services such as legal and professional activities, advertising and market research

The lowest regional shares are found consistently for retail trade, accommodation and food services, financial activities, provision of public goods and personal services, as well as for intra-EU trade of construction activities

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By type of transaction (2014)

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By type of value chain (2014)

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2b/ Takeaways for economic activities

Changes between 2000 and 2014 suggest a sort of convergence process, with a number of tradable services increasing their share in intra-EU trade transactions more than average and leading a general push for value chains with regional participation

In particular: wholesale trade, land transport, postal and courier activities, telecommunications, computer programming, professional activities, legal services, advertising and market research, administrative services, auxiliary financial activities

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Change by type of transaction (2000-2014)

Change of synthetic indicator [-1, +1]

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Change by type of value chain (2000-2014)

Change of synthetic indicator [-1, +1]

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Measures of competitiveness

External competitiveness

Internal competitiveness

Value added in trade

Productivity

Has a higher regional share in economist transactions contributed to...

…increase EU value added serving final demand in RoW (more than foreign

value added serving EU final demand)?

…improve resource allocation within the EU and increase sectoral efficiency for

the EU aggregate?

Regional share in extra-EU exports Final demand / value added

Regional share in total EU value added Value added

Dimension Indicator

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Link with external competitiveness

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Interpretation by approach

External competitiveness by product of final demand: EU capacity of generating value added as participant in global value chains of a particular product of final demand, regardless of the production stage or economic activity involved in the process External competitiveness by activity of value added: EU capacity of generating value added in a particular economic activity serving global value chains regardless of the production stage or product of final demand being eventually served

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Alternative measures

We define the external performance as the EU value added serving final demand in the Rest of the World: By benchmark: either the change in the external performance relative to the starting period (i.e. change in exports of value added) or relative to competitors (i.e. balance with respect to foreign value added serving EU final demand) Participation effect: alternatively to actual data (nominal figures), we provide an adjusted figure for valued added in trade accounting only for real changes of the participation in foreign final demand

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Aggregate comparison of measures

EU value added serving final demand in the Rest of the World increased faster than the other way around between 2000 and 2014, contributing to increase the starting bilateral surplus

Adjusted figures suggest that this increase would be fully the result of a volume effect rather than an increase of EU participation in value chains ending abroad, in contrast with competitiveness gains of the Rest of the World offsetting weaker growth in EU final demand

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Aggregate comparison of measures

Total Participation effect

Index 100 = 2000 EU – RoW balance

(-1 to +1)

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Integration highlights

Most economic activities –and particularly tradable services- recorded since 2000 an increase of regional shares in exports, a strong growth in EU value added serving final demand in the Rest of the World, and an improvement in the balance of value added in trade

However, the picture turns less rosy overall when adjusting for volume effects, particularly for high-tech manufacturing, remaining only a few activities for which increasing regional shares in exports coupled positive participation effects (mainly telecommunications and legal services)

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2000 2014 change Exports Balance Exports BalanceCrop and animal production, hunting and related service activities A01 -0.20 0.07 0.27 0.73 0.08 -0.34 -0.50Forestry and logging A02 -0.24 0.01 0.26 0.66 0.04 0.00 0.11Fishing and aquaculture A03 -0.14 0.03 0.17 0.78 0.48 -0.45 -0.57Mining and quarrying B -0.41 0.02 0.43 0.31 0.41 -0.87 -0.44Manufacture of food products, beverages and tobacco products C10-C12 -0.14 0.14 0.28 0.78 0.09 -0.10 -0.38Manufacture of textiles, wearing apparel and leather products C13-C15 0.00 0.14 0.14 0.60 -0.15 -0.39 -0.66Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materialsC16 -0.11 0.04 0.15 0.60 0.10 -0.47 -0.26Manufacture of paper and paper products C17 0.10 0.31 0.21 0.74 0.40 0.03 -0.14Printing and reproduction of recorded media C18 0.01 0.17 0.16 0.54 -0.13 -0.22 -0.66Manufacture of coke and refined petroleum products C19 -0.05 0.29 0.34 0.86 0.03 -0.04 0.01Manufacture of chemicals and chemical products C20 0.18 0.41 0.23 0.80 0.14 -0.09 -0.77Manufacture of basic pharmaceutical products and pharmaceutical preparations C21 -0.01 0.26 0.27 0.80 -0.04 0.05 -0.54Manufacture of rubber and plastic products C22 0.16 0.39 0.23 0.73 0.08 -0.06 -0.68Manufacture of other non-metallic mineral products C23 -0.07 0.12 0.19 0.26 -0.46 -0.52 -0.71Manufacture of basic metals C24 -0.11 0.05 0.16 0.88 0.01 -0.27 -0.56Manufacture of fabricated metal products, except machinery and equipment C25 0.15 0.30 0.15 0.75 0.07 0.06 -0.23Manufacture of computer, electronic and optical products C26 0.19 0.26 0.07 0.30 -0.21 -0.30 -0.64Manufacture of electrical equipment C27 0.17 0.33 0.16 0.74 0.08 -0.28 -0.95Manufacture of machinery and equipment n.e.c. C28 0.18 0.38 0.20 0.77 0.16 -0.15 -0.61Manufacture of motor vehicles, trailers and semi-trailers C29 0.32 0.51 0.19 0.83 0.21 -0.04 -0.54Manufacture of other transport equipment C30 0.37 0.35 -0.03 0.80 0.20 -0.36 -0.67Manufacture of furniture; other manufacturing C31_C32 0.04 0.23 0.19 0.64 0.04 0.04 -0.40Repair and installation of machinery and equipment C33 0.26 0.32 0.06 0.71 0.12 -0.13 -0.23Electricity, gas, steam and air conditioning supply D35 -0.28 -0.21 0.07 0.77 -0.14 -0.46 -0.39Water collection, treatment and supply E36 -0.27 -0.08 0.19 0.86 0.18 -0.28 -0.30Sewerage; waste collection, treatment and disposal activities; materials recovery; remediation activities and other waste management services E37-E39 -0.15 0.02 0.17 0.14 -0.52 -0.27 -0.02Construction F -0.16 -0.05 0.11 0.86 0.38 0.00 0.19Wholesale and retail trade and repair of motor vehicles and motorcycles G45 -0.04 0.11 0.15 0.80 0.32 0.45 -0.30Wholesale trade, except of motor vehicles and motorcycles G46 -0.27 -0.13 0.15 0.87 0.36 -0.01 -0.41Retail trade, except of motor vehicles and motorcycles G47 -0.29 -0.04 0.25 0.80 -0.04 0.08 -0.10Land transport and transport via pipelines H49 -0.15 0.02 0.18 0.79 0.15 -0.31 -0.50Water transport H50 0.21 0.28 0.07 0.68 -0.07 -0.46 -0.33Air transport H51 0.00 0.13 0.13 0.58 -0.14 -0.24 -0.60Warehousing and support activities for transportation H52 -0.11 0.05 0.17 0.80 -0.10 -0.26 -0.62Postal and courier activities H53 -0.30 0.10 0.40 0.61 0.04 0.00 -0.55Accommodation and food service activities I -0.35 -0.17 0.19 0.75 0.15 -0.17 -0.35Publishing activities J58 -0.12 -0.08 0.05 0.59 0.12 0.30 0.12Motion picture, video and television programme production, sound recording and music publishing activities; programming and broadcasting activitiesJ59_J60 -0.40 -0.29 0.10 0.71 0.15 0.12 0.02Telecommunications J61 -0.26 -0.08 0.18 0.81 0.31 -0.05 0.40Computer programming, consultancy and related activities; information service activitiesJ62_J63 -0.31 0.08 0.40 0.96 0.38 0.46 -0.20Financial service activities, except insurance and pension funding K64 0.04 0.27 0.23 0.77 0.18 -0.41 -0.93Insurance, reinsurance and pension funding, except compulsory social security K65 -0.45 -0.34 0.11 0.85 0.13 0.28 -0.42Activities auxiliary to financial services and insurance activities K66 -0.57 -0.36 0.21 0.71 0.06 0.07 -0.26Real estate activities L68 -0.28 -0.11 0.17 0.74 -0.04 -0.13 -0.35Legal and accounting activities; activities of head offices; management consultancy activitiesM69_M70 -0.31 -0.17 0.13 0.91 0.34 0.64 0.20Architectural and engineering activities; technical testing and analysis M71 -0.22 -0.09 0.13 0.83 0.12 0.11 -0.40Scientific research and development M72 -0.30 -0.09 0.22 0.82 -1.08 -0.06 -0.36Advertising and market research M73 -0.26 -0.08 0.18 0.91 0.09 0.60 -0.13Other professional, scientific and technical activities; veterinary activities M74_M75 -0.31 -0.09 0.22 0.93 1.03 -0.01 -0.28Administrative and support service activities N -0.30 -0.12 0.19 0.85 0.12 0.13 -0.27Public administration and defence; compulsory social security O84 -0.22 -0.05 0.17 0.76 0.14 0.01 0.10Education P85 -0.25 -0.11 0.14 0.87 0.21 0.01 0.07Human health and social work activities Q -0.19 -0.05 0.14 0.88 0.20 0.23 -0.01Other service activities R_S -0.24 -0.07 0.17 0.79 0.20 -0.02 -0.20Activities of households as employers; undifferentiated goods- and services-producing activities of households for own useT -0.20 -0.01 0.19 0.61 0.05 -0.69 -0.78

External competitiveness (change 2000-2014)Regional share


Characterization of economic activities: by product of final demand Regional share in extra-EU exports [-1,+1]: average for both accounting criteria relative to 2000 average External competitiveness [-1,+1]: change between 2000 and 2014 of EU value added in RoW final demand (exports) and difference with respect to RoW value added in EU final demand (balance)

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Characterization of economic activities: by activity of value added Regional share in extra-EU exports [-1,+1]: average for both accounting criteria relative to 2000 average External competitiveness [-1,+1]: change between 2000 and 2014 of EU value added in RoW final demand (exports) and difference with respect to RoW value added in EU final demand (balance)

2000 2014 change Exports Balance Exports BalanceCrop and animal production, hunting and related service activities A01 -0.17 0.15 0.32 0.77 -0.05 0.05 -0.09Forestry and logging A02 0.03 0.18 0.15 0.80 0.57 0.19 0.19Fishing and aquaculture A03 -0.21 0.25 0.46 0.76 0.00 -0.33 -0.04Mining and quarrying B 0.06 0.43 0.37 0.56 -0.07 -0.78 -0.09Manufacture of food products, beverages and tobacco products C10-C12 -0.34 -0.06 0.27 0.81 0.11 -0.13 -0.75Manufacture of textiles, wearing apparel and leather products C13-C15 0.14 0.24 0.10 0.56 -0.17 -0.60 -0.65Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materialsC16 0.21 0.34 0.13 0.67 0.04 -0.58 -0.98Manufacture of paper and paper products C17 0.45 0.52 0.08 0.51 0.16 0.00 -0.21Printing and reproduction of recorded media C18 -0.21 -0.12 0.09 0.42 0.00 -0.15 -0.76Manufacture of coke and refined petroleum products C19 0.36 0.46 0.10 0.73 -0.17 0.08 -0.13Manufacture of chemicals and chemical products C20 0.48 0.57 0.09 0.70 0.06 -0.26 -0.67Manufacture of basic pharmaceutical products and pharmaceutical preparations C21 -0.09 -0.04 0.05 0.81 0.02 -0.01 -0.49Manufacture of rubber and plastic products C22 0.45 0.59 0.14 0.77 0.26 0.03 -0.40Manufacture of other non-metallic mineral products C23 0.01 0.22 0.21 0.57 -0.04 -0.64 -1.18Manufacture of basic metals C24 0.56 0.62 0.05 0.66 0.00 -0.13 -0.32Manufacture of fabricated metal products, except machinery and equipment C25 0.23 0.36 0.13 0.78 0.21 0.10 -0.26Manufacture of computer, electronic and optical products C26 0.26 0.37 0.11 0.39 -0.10 -0.76 -0.55Manufacture of electrical equipment C27 0.35 0.47 0.12 0.75 0.18 -0.51 -1.18Manufacture of machinery and equipment n.e.c. C28 0.12 0.28 0.16 0.81 0.19 -0.30 -0.89Manufacture of motor vehicles, trailers and semi-trailers C29 0.29 0.43 0.14 0.85 0.25 -0.24 -0.98Manufacture of other transport equipment C30 0.27 0.03 -0.23 0.72 0.27 -0.45 -0.65Manufacture of furniture; other manufacturing C31_C32 -0.14 0.01 0.15 0.79 0.37 0.15 -0.33Repair and installation of machinery and equipment C33 -0.17 0.03 0.20 0.80 0.03 0.27 0.03Electricity, gas, steam and air conditioning supply D35 0.09 -0.01 -0.10 0.83 0.28 -0.36 -0.38Water collection, treatment and supply E36 -0.16 0.11 0.27 0.80 0.47 -0.30 -0.37Sewerage; waste collection, treatment and disposal activities; materials recovery; remediation activities and other waste management services E37-E39 0.24 0.40 0.15 0.88 0.34 0.27 -0.10Construction F -0.30 0.05 0.35 0.83 0.14 0.09 -0.16Wholesale and retail trade and repair of motor vehicles and motorcycles G45 -0.22 0.12 0.33 0.90 0.54 0.70 0.54Wholesale trade, except of motor vehicles and motorcycles G46 -0.23 0.13 0.36 0.83 0.29 0.01 -0.35Retail trade, except of motor vehicles and motorcycles G47 -0.32 0.12 0.44 0.48 -0.30 -0.40 -0.72Land transport and transport via pipelines H49 -0.32 -0.06 0.26 0.77 0.15 -0.32 -0.63Water transport H50 -0.43 -0.40 0.03 0.64 0.12 -0.35 -0.12Air transport H51 -0.15 0.00 0.15 0.69 0.29 0.07 0.03Warehousing and support activities for transportation H52 0.06 0.07 0.02 0.82 0.10 -0.30 -0.66Postal and courier activities H53 -0.50 -0.24 0.27 0.66 0.15 0.07 -0.09Accommodation and food service activities I -0.36 -0.40 -0.04 0.86 0.53 0.16 0.01Publishing activities J58 -0.31 -0.22 0.09 0.79 0.34 0.17 -0.33Motion picture, video and television programme production, sound recording and music publishing activities; programming and broadcasting activitiesJ59_J60 -0.44 -0.26 0.18 0.73 0.14 -0.01 -0.33Telecommunications J61 -0.26 0.07 0.33 0.67 0.10 0.34 0.46Computer programming, consultancy and related activities; information service activitiesJ62_J63 -0.56 -0.30 0.25 0.93 0.20 0.31 -0.19Financial service activities, except insurance and pension funding K64 -0.39 -0.26 0.13 0.79 0.13 -0.21 -0.54Insurance, reinsurance and pension funding, except compulsory social security K65 -0.47 -0.57 -0.11 0.87 0.48 -0.11 -0.54Activities auxiliary to financial services and insurance activities K66 0.11 0.25 0.14 0.82 0.04 0.18 -0.10Real estate activities L68 -0.48 -0.38 0.10 0.85 0.23 0.16 0.01Legal and accounting activities; activities of head offices; management consultancy activitiesM69_M70 -0.22 0.07 0.29 0.87 0.18 0.38 0.19Architectural and engineering activities; technical testing and analysis M71 -0.26 -0.11 0.15 0.81 0.06 0.25 -0.01Scientific research and development M72 0.03 -0.04 -0.07 -0.10 -1.06 -0.76 -1.03Advertising and market research M73 -0.05 0.20 0.25 0.76 0.02 0.29 -0.26Other professional, scientific and technical activities; veterinary activities M74_M75 0.00 0.47 0.48 0.85 0.34 0.01 -0.38Administrative and support service activities N -0.26 0.10 0.36 0.84 0.35 0.08 -0.28Public administration and defence; compulsory social security O84 -0.12 0.01 0.13 0.83 0.46 0.21 0.08Education P85 -0.41 -0.34 0.07 0.81 0.16 -0.14 -0.16Human health and social work activities Q -0.53 -0.30 0.23 0.91 0.80 0.42 0.59Other service activities R_S -0.54 -0.06 0.48 0.81 0.20 0.06 -0.23Activities of households as employers; undifferentiated goods- and services-producing activities of households for own useT -0.85 -0.69 0.15 0.65 0.09 -0.55 -0.01

Regional shareExternal competitiveness (change 2000-2014)


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Link with internal competitiveness

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Productivity channels

An increasing regional share could have direct and indirect effects in sectoral productivity:

-Direct effects: a higher share of value added in direct regional transactions (i.e. from intra-EU trade) could bring sectoral efficiency gains as a result of competing out of domestic markets [much higher for manufacturing, high-tech segment in particular]

-Indirect effects: a higher participation in regional value added routes (beyond direct one) could expose the sector to higher competition pressure even if remaining as domestic suppliers [predominant for services]

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Potential direct and indirect channels

2014 data

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Measure of internal competitiveness

We define productivity as real value added per person employed for the EU aggregate at constant prices and exchange rates of 2000

We compute the change between 2000 and 2014 for absolute figures and relative to US levels (our proxy for technological frontier)

We compare results with dynamics of the regional share in total transactions between 2000 and 2014, using alternative measurement approaches

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Integration highlights

Productivity gains for EU value added were widespread within the manufacturing sector and particularly intense for those with high technological content, as well as for ICT services and some logistic activities. On the contrary, productivity declined for the EU aggregate in services with low tradability and in the construction sector

The overall assessment turns less positive when productivity changes are relative to the US, with a limited number of economic activities increasing (or keeping a high) regional share at the same time they close the gap with the technological frontier: pharma, plastics, paper and transport equipment within manufacturing, and telecommunications, financial activities and trade of motor vehicles among services

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2000 2014 change 2000 2014 change Absolute RelativeCrop and animal production, hunting and related service activitiesA01 0.32 0.60 0.28 0.13 0.22 0.09 0.39 0.00Forestry and logging A02 0.08 0.39 0.31 0.15 0.18 0.03 0.14 -0.06Fishing and aquaculture A03 0.71 0.80 0.09 0.03 -0.06 -0.09 -0.08 -0.22Mining and quarrying B 0.80 0.89 0.08 -0.32 -0.39 -0.06 -0.18 -0.11Manufacture of food products, beverages and tobacco productsC10-C12 0.54 0.73 0.19 -0.06 0.04 0.10 0.07 0.00Manufacture of textiles, wearing apparel and leather productsC13-C15 0.89 0.91 0.02 -0.09 -0.10 -0.01 0.15 -0.11Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materialsC16 0.64 0.75 0.11 0.09 0.13 0.04 0.12 -0.14Manufacture of paper and paper products C17 0.87 0.88 0.01 -0.02 -0.01 0.00 0.30 0.14Printing and reproduction of recorded media C18 -0.32 -0.24 0.09 0.21 0.26 0.05 0.22 -0.26Manufacture of coke and refined petroleum products C19 0.70 0.81 0.11 -0.11 0.02 0.12 -0.06 -0.07Manufacture of chemicals and chemical products C20 0.90 0.93 0.02 -0.08 -0.19 -0.11 0.21 -0.04Manufacture of basic pharmaceutical products and pharmaceutical preparationsC21 0.87 0.92 0.05 -0.09 -0.09 0.00 0.49 0.19Manufacture of rubber and plastic products C22 0.83 0.89 0.07 0.17 0.11 -0.06 0.26 0.10Manufacture of other non-metallic mineral productsC23 0.54 0.69 0.14 -0.02 0.05 0.07 0.24 0.03Manufacture of basic metals C24 0.89 0.91 0.02 0.06 -0.01 -0.07 0.20 -0.16Manufacture of fabricated metal products, except machinery and equipmentC25 0.61 0.71 0.10 0.27 0.27 0.00 0.13 0.04Manufacture of computer, electronic and optical productsC26 0.93 0.92 -0.01 -0.22 -0.18 0.04 0.73 -0.32Manufacture of electrical equipment C27 0.89 0.92 0.03 0.00 -0.04 -0.04 0.14 -0.20Manufacture of machinery and equipment n.e.c.C28 0.85 0.88 0.03 0.05 0.09 0.03 0.18 -0.11Manufacture of motor vehicles, trailers and semi-trailersC29 0.91 0.91 0.00 0.13 0.22 0.08 0.24 -0.25Manufacture of other transport equipment C30 0.87 0.82 -0.06 -0.03 0.06 0.08 0.46 0.24Manufacture of furniture; other manufacturingC31_C32 0.82 0.88 0.06 0.01 0.03 0.03 0.03 -0.15Repair and installation of machinery and equipmentC33 -0.40 -0.01 0.39 0.35 0.39 0.04 0.10 0.31Electricity, gas, steam and air conditioning supplyD35 -0.04 -0.40 -0.35 -0.09 0.04 0.13 0.09 0.05Water collection, treatment and supply E36 -0.79 -0.64 0.16 0.10 0.19 0.09 -0.11 -0.01Sewerage; waste collection, treatment and disposal activities; materials recovery; remediation activities and other waste management services E37-E39 0.37 0.63 0.26 0.05 0.08 0.03 -0.11 0.05Construction F -0.98 -0.89 0.08 0.16 0.26 0.10 -0.02 0.12Wholesale and retail trade and repair of motor vehicles and motorcyclesG45 -0.83 -0.07 0.76 0.29 0.31 0.02 0.08 0.22Wholesale trade, except of motor vehicles and motorcyclesG46 -0.05 0.61 0.66 0.02 0.00 -0.02 0.17 -0.04Retail trade, except of motor vehicles and motorcyclesG47 -0.79 -0.58 0.20 0.02 0.05 0.03 0.10 -0.09Land transport and transport via pipelines H49 -0.36 0.10 0.46 0.02 0.11 0.08 0.03 -0.03Water transport H50 0.21 0.15 -0.06 -0.10 -0.12 -0.02 0.38 -0.34Air transport H51 0.56 0.66 0.11 -0.10 -0.02 0.08 0.20 -0.08Warehousing and support activities for transportationH52 0.28 0.34 0.06 -0.10 0.05 0.15 0.09 -0.22Postal and courier activities H53 -0.70 -0.40 0.30 -0.15 0.06 0.21 -0.05 -0.01Accommodation and food service activities I -0.90 -0.92 -0.02 -0.04 0.06 0.11 -0.19 -0.09Publishing activities J58 -0.04 0.08 0.13 0.00 0.09 0.09 0.14 -0.27Motion picture, video and television programme production, sound recording and music publishing activities; programming and broadcasting activitiesJ59_J60 -0.26 -0.12 0.15 -0.16 -0.06 0.09 0.06 -0.28Telecommunications J61 -0.40 -0.04 0.36 -0.06 0.00 0.07 0.87 0.43Computer programming, consultancy and related activities; information service activitiesJ62_J63 -0.73 -0.19 0.54 -0.09 -0.02 0.07 0.23 -0.41Financial service activities, except insurance and pension fundingK64 -0.54 -0.46 0.08 -0.22 -0.08 0.14 0.29 0.07Insurance, reinsurance and pension funding, except compulsory social securityK65 -0.61 -0.78 -0.17 -0.36 -0.27 0.09 -0.04 -0.22Activities auxiliary to financial services and insurance activitiesK66 -0.14 0.14 0.27 -0.30 -0.22 0.08 -0.10 -0.09Real estate activities L68 -0.98 -0.98 0.01 -0.08 0.04 0.13 0.10 -0.20Legal and accounting activities; activities of head offices; management consultancy activitiesM69_M70 -0.08 0.38 0.46 -0.08 -0.12 -0.04 -0.01 0.02Architectural and engineering activities; technical testing and analysisM71 -0.20 -0.02 0.18 0.02 -0.01 -0.03 0.02 -0.09Scientific research and development M72 0.37 -0.02 -0.40 0.18 0.11 -0.07 -0.18 -0.26Advertising and market research M73 0.04 0.49 0.45 0.08 0.04 -0.05 -0.01 -0.09Other professional, scientific and technical activities; veterinary activitiesM74_M75 0.00 0.59 0.60 -0.11 -0.06 0.05 -0.31 -0.25Administrative and support service activities N -0.13 0.28 0.41 -0.05 -0.01 0.03 -0.12 -0.47Public administration and defence; compulsory social securityO84 -0.98 -0.96 0.02 0.07 0.14 0.07 0.10 0.06Education P85 -0.99 -0.98 0.01 -0.01 0.08 0.09 -0.06 -0.02Human health and social work activities Q -1.00 -1.00 0.00 0.03 0.22 0.18 0.03 -0.01Other service activities R_S -0.88 -0.83 0.05 -0.04 0.07 0.11 -0.06 -0.08Activities of households as employers; undifferentiated goods- and services-producing activities of households for own useT -1.00 -1.00 0.00 -0.65 -0.33 0.32 -0.05 -0.06

Direct channel Indirect channel

Regional share Internal competitiveness

(change 2000-2014)

Characterization of economic activities: by type of transaction Regional share in total EU value added [-1,+1]: each accounting criteria relative to 2000 average Internal competitiveness [-1,+1]: productivity change over 2000 figures for EU (absolute) and EU-to-US ratio (relative)

SUMMARY

47

Under the Single Market, regional shares in EU value added generation increased across the board, keeping high figures for manufactures and growing faster for tradable services

At first sight, further integration would have been rewarded with overall improvements in external competitiveness and productivity gains for more tradable activities

However, a deeper analysis suggests that in general terms higher regional shares has not been a sufficient condition to couple increasing foreign value added in EU final demand or to close productivity gaps with the technological frontier

Successful stories under this restrictive perspective are limited to telecommunications on both competitiveness dimensions, legal services on the external front and a few mid-high tech manufacturing activities in terms of productivity gains

FUTURE WORK

49

Use the full price and exchange rate-adjusted dataset for computations (under construction)

Develop econometric analysis, using control variables –including persisting barriers within the Single Market- to assess: # Whether there is scope for further increasing regional shares in certain activities or member states # The impact of changes in the regional share on external and internal competitiveness

Future work

THANK YOU!

ANNEX: WIOD DATABASE

52

World Input-Output Database (WIOD)

World Input-Output Tables and underlying data,

covering 43 countries, and a model for the rest of the world for the period 2000-2014. Data for 56 sectors are classified according to the International Standard

Industrial Classification revision 4 (ISIC Rev. 4). The tables adhere to the

2008 version of the SNA.

WIOD Release 2016 http://www.wiod.org/home

http://www.wiod.org/home

53

Sectoral coverage in WIOD

SectorPrimary A01 Crop and animal production, hunting and related service activitiesPrimary A02 Forestry and loggingPrimary A03 Fishing and aquaculturePrimary B Mining and quarryingLow Tech Manufactures C10-C12 Manufacture of food products, beverages and tobacco productsLow Tech Manufactures C13-C15 Manufacture of textiles, wearing apparel and leather productsLow Tech Manufactures C16 Manufacture of wood and of products of wood and cork, except furniture; manufacture of articles of straw and plaiting materialsLow Tech Manufactures C17 Manufacture of paper and paper productsLow Tech Manufactures C18 Printing and reproduction of recorded mediaLow-Medium Tech Manufactures C19 Manufacture of coke and refined petroleum products Medium-High Tech Manufactures C20 Manufacture of chemicals and chemical products High Tech Manufactures C21 Manufacture of basic pharmaceutical products and pharmaceutical preparationsLow-Medium Tech Manufactures C22 Manufacture of rubber and plastic productsLow-Medium Tech Manufactures C23 Manufacture of other non-metallic mineral productsLow-Medium Tech Manufactures C24 Manufacture of basic metalsLow-Medium Tech Manufactures C25 Manufacture of fabricated metal products, except machinery and equipmentHigh Tech Manufactures C26 Manufacture of computer, electronic and optical productsMedium-High Tech Manufactures C27 Manufacture of electrical equipmentMedium-High Tech Manufactures C28 Manufacture of machinery and equipment n.e.c.Medium-High Tech Manufactures C29 Manufacture of motor vehicles, trailers and semi-trailersHigh Tech Manufactures C30 Manufacture of other transport equipmentLow Tech Manufactures C31_C32 Manufacture of furniture; other manufacturingLow-Medium Tech Manufactures C33 Repair and installation of machinery and equipmentLow Tech Manufactures D35 Electricity, gas, steam and air conditioning supplyLow Tech Manufactures E36 Water collection, treatment and supplyLow Tech Manufactures E37-E39 Sewerage; waste collection, treatment and disposal activities; materials recovery; remediation activities and other waste management services Non-Tradable Services F ConstructionTradable Services G45 Wholesale and retail trade and repair of motor vehicles and motorcyclesTradable Services G46 Wholesale trade, except of motor vehicles and motorcyclesTradable Services G47 Retail trade, except of motor vehicles and motorcyclesTradable Services H49 Land transport and transport via pipelinesTradable Services H50 Water transportTradable Services H51 Air transportTradable Services H52 Warehousing and support activities for transportationTradable Services H53 Postal and courier activitiesTradable Services I Accommodation and food service activitiesTradable Services J58 Publishing activitiesTradable Services J59_J60 Motion picture, video and television programme production, sound recording and music publishing activities; programming and broadcasting activitiesTradable Services J61 TelecommunicationsTradable Services J62_J63 Computer programming, consultancy and related activities; information service activitiesTradable Services K64 Financial service activities, except insurance and pension fundingTradable Services K65 Insurance, reinsurance and pension funding, except compulsory social securityTradable Services K66 Activities auxiliary to financial services and insurance activitiesNon-Tradable Services L68 Real estate activitiesTradable Services M69_M70 Legal and accounting activities; activities of head offices; management consultancy activitiesTradable Services M71 Architectural and engineering activities; technical testing and analysisTradable Services M72 Scientific research and developmentTradable Services M73 Advertising and market researchTradable Services M74_M75 Other professional, scientific and technical activities; veterinary activitiesTradable Services N Administrative and support service activitiesNon-Tradable Services O84 Public administration and defence; compulsory social securityNon-Tradable Services P85 EducationNon-Tradable Services Q Human health and social work activitiesNon-Tradable Services R_S Other service activitiesNon-Tradable Services T Activities of households as employers; undifferentiated goods- and services-producing activities of households for own useNon-Tradable Services U Activities of extraterritorial organizations and bodies

Industry

54

EU15

EU13 European Union 28

EU neighbours

America

Asia-Pacific

Develo

ped E

merg

ing

Rest of the World

Country coverage in WIOD

ANNEX: METHODOLOGICAL NOTES

56

For an specific economic activity 'i' and year 't': where 'Ri' is the sectoral and 'R' the total regional share in percentage terms, 'tanh' the hyperbolic tangent function that yields a symmetric index between -1 and +1, measuring the relative distance of the original sectoral regional share to the one for all economic activities

Synthetic indicator for regional shares

𝑅𝑖,𝑡 = tanh 𝑙𝑛𝑅𝑖,𝑡𝑅𝑡,

57

Exports: where 'Xi,t' is the EU value added serving final demand in the Rest of the World (RoW) Balance: where 'Mi,t' is the RoW value added serving final demand in the EU

Synthetic indicators for external competitiveness

𝑋𝑖,𝑡 = tanh 𝑙𝑛𝑋𝑖,𝑡𝑋𝑖,2000

,

𝐵𝑖,𝑡 = tanh 𝑙𝑛𝑋𝑖,𝑡𝑀𝑖,𝑡,

58

Participation effect in external competitiveness

Adjusted figures: where 'xpi,t' ('mpi,t') is the participation of EU (RoW) value added in global value added serving final demand in the RoW (EU) adjusted by price and exchange rate changes Adjusted indicators:

𝑋𝑃𝑖,𝑡 = tanh 𝑙𝑛𝑋𝑃𝑖,𝑡𝑋𝑃𝑖,2000

𝑋𝑃𝑖,𝑡 = 𝑋𝑖,2000 × 𝑥𝑝𝑖,𝑡 𝑀𝑃𝑖,𝑡 = 𝑀𝑖,2000 ×𝑚𝑝𝑖,𝑡

𝐵𝑃𝑖,𝑡 = tanh 𝑙𝑛𝑋𝑃𝑖,𝑡𝑀𝑃𝑖,𝑡

59

Absolute: where 'πi,t' is the EU aggregate real value added per person employed (apparent labour productivity) Relative: where 'πi_US' is the US productivity benchmark

Synthetic indicators for internal competitiveness

𝜋𝑖,𝑡 = tanh 𝑙𝑛𝜋𝑖,𝑡𝜋𝑖,2000

,

𝜋𝑟𝑖,𝑡 = tanh 𝑙𝑛𝜋𝑖,𝑡𝜋𝑖_𝑈𝑆,𝑡

,

SINGLE MARKET INTEGRATION AND COMPETITIVENESS A VALUE CHAIN PERSPECTIVE JRC-B5, September 2018

single market integration and competitiveness

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