Value Chains: Production Upstreamness and Downstreamness Revisited

Abstract

Measures devised to quantify value chain position have been used increasingly in recent years. While the constructs underlying these measures are meaningful, this paper identifies an overlooked implementation problem. Proposed algorithms have been applied as though the underlying data represent flows. Implementation data are drawn from modern input-output accounting frameworks that recognize secondary production explicitly. Unadjusted Use matrices are not conventional flows matrices because they do not identify the industries from which commodities originate. We demonstrate logical inconsistencies that arise, provide correct flow matrix formulations for upstreamness and downstreamness measures, and present empirical comparisons of correct and incorrect formulations.