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Vertical Specialization and Trade Surplus in China by Wang Wei

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Appendix

Methodology and hypotheses

The measure of VS as determined by Hummel et al. (2001) has been applied to the Chinese economy. The formula used is provided below:

image

where image, the sum of all industrial sectors VS of year t;

image, the sum of all industrial sectors export of year t; and

VSSt = the VS share of total export of year t.

VS for each industry sector is determined by:

where = imported intermediate good used by sector i for year t (including ...

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