In a recent contribution to the AER, Koopman, Wang, and Wei (2014) proposed a decomposition of a country's gross exports into value-added components and double-counted terms. It is motivated by complex manipulation of basic accounting identities. In this comment we provide an alternative framework based on “hypothetical extraction.” This parsimonious approach provides a clear definition of domestic value added in exports and has a natural extension into decompositions of bilateral export flows. (JEL E01, E16, F14, F23, L14)
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Los et al. (2016) studied this question.
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