Vertical specialisation definition
Vertical specialisation offers another means of exploring the link between fragmentation of production and regional integration. This indicator essentially relies on input-output tables, which classify goods according to their use rather than their descriptive characteristics, to measure the proportion of an exported good that is made up of imported inputs. OECD (2011c), using the Hummels-Ishii-Yi indicator of vertical specialisation, finds evidence of significant increases in the import content of exports across Asia between 1995 and 2005, with Malaysia, the Philippines and Thailand standing out. There is more evidence of vertical specialisation in more technology-intensive goods; this echoes the findings on high intra-industry trade in the electronics and ICT sectors. Using the same data, the ratio of re-exported intermediate inputs to the quantity of intermediate exports14 suggests that the Philippines, Malaysia and Thailand tend to supply intermediate products in the early stages of global supply chains. By contrast, China’s relatively lower score suggest its exported intermediates tend to be consumed at the later stages of global value chains.